Grand Committee
Monday, 23 July 2012.
Arrangement of Business
Announcement
3.30 pm
The Deputy Chairman of Committees (Lord Geddes): My Lords, as is customary on these occasions, I must advise your Lordships, although I am sure that everyone is aware of it, that if there is a Division in the House, the Committee will adjourn for 10 minutes.
Neighbourhood Planning (Referendums) Regulations 2012
Copy of the SICopy of the Report
Considered in Grand Committee
3.30 pm
That the Grand Committee do report to the House that is has considered the Neighbourhood Planning (Referendums) Regulations 2012.
Relevant document: 3rd Report from the Joint Committee on Statutory Instruments.
The Parliamentary Under-Secretary of State, Department for Communities and Local Government (Baroness Hanham): My Lords, the Localism Act introduced neighbourhood planning which enables communities to have a far greater say in deciding the future of the areas where they live and work—deciding, for example, where homes, shops and offices are built and which green spaces should be developed or protected. Parish councils and designated neighbourhood forums can use these powers to produce neighbourhood plans, which can become part of the statutory development plan for the local area as long as they meet certain conditions such as being in general conformity with the strategic policies of the local plan and neighbourhood development orders that again, subject to meeting basic conditions, can grant planning permission, removing the need for planning applications where development is consistent with the order.
Parish councils and community organisations could also use these powers to introduce a community right to build order, a type of neighbourhood development order that enables communities to bring forward small-scale, site-specific, community-led development.
Once a neighbourhood plan or order has passed independent examination and met certain legal tests, the Localism Act requires that the plan or order should be put to a referendum of the electors in the area concerned. The referendum is important in retaining the credibility of the principle that the community is in the driving seat of planning at the neighbourhood level. A referendum will give everyone in the community the opportunity to have their say and demonstrate
evidence of community support in a manner which cannot be demonstrated through a petition or consultation.
The Neighbourhood Planning (Referendum) Regulations 2012 are not about the principle of whether a referendum should be held. This principle has already been established in the Localism Act which gained Royal Assent in November 2011. The purpose of these regulations is to provide for the conduct of referendums in relation to whether a neighbourhood plan, a neighbourhood development order or a community right to build order should come into effect. These regulations follow existing practice and largely replicate the Local Authorities (Conduct of Referendums) (England) Regulations 2012, which the House has recently considered. Council election officers are familiar with those.
Lord Jones: I am grateful to the Minister for giving way. Before our proceedings are ended, is it possible for her to indicate what the situation shall be in Wales, in the knowledge that, decisively, these matters are regarding England?
Baroness Hanham: May I answer that question before we finish?
We consulted the independent Electoral Commission, which undertook a public consultation on the referendum questions set out in Schedule 1 and on the ballot papers. As a result, the Government have adopted the questions and the form of the ballot papers exactly as recommended by the commission. Provision has been made, if appropriate, for combining polls for neighbourhood planning referendums and elections. The decision on whether to combine polls is at the discretion of the counting officer in discussion with the returning and counting officers of any other polls.
We already have more than 200 front-runner communities taking forward the new neighbourhood planning powers. The Neighbourhood Planning (Referendums) Regulations provide for the final step in the process by ensuring that the wider community has the final say on whether the plans or orders come into legal force. The regulations set out the necessary rules for ensuring effective administration of such referendums, in which the electorate can have confidence. They follow a well tried practice and will help ensure efficient, effective and consistent administration of any neighbourhood planning referendum. I commend the regulations to the Committee.
Baroness Eaton: My Lords, I thank the noble Baroness for the clarity with which she presented the regulations. As your Lordships will be aware, councillors play a central role to facilitate, encourage and champion local people becoming involved in planning. The LGA, of which I am a vice-president, has consistently supported the principles of neighbourhood planning as a tool available to local authorities, but has also highlighted the unnecessary bureaucracy of the Localism Bill.
These concerns have not prevented the LGA from working very constructively alongside DCLG and member councils on more than 200 front-runner pilots to test out the neighbourhood planning approach. Throughout
the passage of the Bill, the noble Lord, Lord Best, strongly argued that neighbourhood planning referendums would be wasteful, expensive and divisive. I agree with him and the LGA on this matter. With 241 clauses and 25 supporting schedules, the size of the Localism Bill is quite something. In keeping with that scale of detail, these regulations add a further 122 pages of prescription to the 38 pages of detail on neighbourhood planning already found in the Act. It is disappointing that the new regulations are so lengthy, indicating Whitehall’s control over the minutiae of how the localist agenda works on the ground.
What are the problems with referendums? The first is expense. Actions with Communities in Rural England estimates that the cost of parish polls will range from £300 to £8,000. In line with this figure, the LGA estimates that running a referendum on the neighbourhood plan will cost in the region of £5,000. In the current economic climate this level of public expenditure is a core reason why it can be argued that referendums should be avoided it unless they are expressly required by local people, whereupon the cost could be justified.
Secondly, the process is wasteful. Local referendums are time-consuming, complex and expensive. A referendum would be important where there was a local disagreement, but surely they should not be required as a result of national diktat.
Thirdly, local referendums can be divisive. Local experience has proved that community-led planning works most effectively when it is based on consensus building, consultation and discussion. It would be far more appropriate to hold referendums only as a last resort if consensus could not be reached through other means.
Schedule 1 to the regulations details the questions that should be asked in a referendum. While the questions are clear and accessible, by their nature they give communities an either/or option. This reinforces why a referendum is not the most appropriate tool for community decision-making on a neighbourhood plan that may deal with a number of issues. Confusion could easily occur where respondents agree with some but not all parts of a proposed plan.
It is crucial that neighbourhood planning is not considered as the only mechanism for community involvement but is presented as one of a range of measures sitting alongside tried and tested local approaches.
Lord Shipley: My Lords, I shall say a word or two about legitimacy and the ballot box. Development plans and orders and community right to build orders are extremely important matters, and decisions made on each of them have to be legitimate and to be seen to be so. I understand my noble friend Lady Eaton’s position and indeed, as one of its vice-presidents, that of the Local Government Association, and I understand that some think that the proposed process is expensive and bureaucratic. However, I have concluded that there has to be a link between the ballot box and approved neighbourhood development plans and orders and community right to build orders.
Parish councils are elected and have a clear mandate for the decisions that they make. Neighbourhood forums, however, are designated—they are not formally elected through the ballot box—and it is not clear that they have the same degree of democratic mandate. It is possible anyway that the parish council, when elected, may have a split vote in adopting a plan or an order. For that reason, I have concluded that the regulations before us are correct in principle; that localism cannot just be about the rights of principal councils; that localism is about neighbourhoods, parishes and the rights and responsibilities of the people who make up those neighbourhoods; and that, if we are serious about trusting the people, the only way in terms of neighbourhood planning is to be certain what people think. That implies a referendum and the use of a secret ballot through the ballot box.
Lord McKenzie of Luton: My Lords, I thank the Minister for introducing these regulations. I am not sure whether they are meant to provide us with some light relief from the Local Government Finance Bill but they certainly offer almost as many pages as the council tax support default scheme, so the DCLG is keeping us busy. I shall pick up the theme of the LGA and the contribution from the noble Baroness, Lady Eaton.
The LGA points out that 122 pages of prescription are added to the 38 pages of detail in the Act regarding neighbourhood planning. The briefing that we have received from the LGA took us back to some of our debates on the Localism Act. Its view at the time, with which we have some sympathy, was that to insist on a referendum in all cases could bring about unnecessary bureaucracy and, as the noble Baroness has pointed out, could be expensive and indeed divisive.
On the matter of expense, the LGA estimates that a neighbourhood plan referendum could cost in the region of £5,000. Could we be clear that in relation to the costs, whatever they are, the Government see these as new burdens that would be funded centrally in respect of not only the cost of the referendums but all the other aspects of neighbourhood planning that require the local planning authority to support and, if necessary, offer finance to local regions?
There is the question of why we should incur these costs when there is clear support for a proposition that can be evidenced in a number of ways. I understand the point made by the noble Lord, Lord Shipley, that if there is a local development plan from the local planning authority, councillors are elected on that, as indeed they are on the parish council. However, there will be occasions when it is abundantly clear from local ward meetings or from local councillors for a particular ward that something is overwhelmingly supported, and that to force a referendum on that seems unnecessarily bureaucratic. Still, we are where we are on that.
The question asked in the regulations is very stark and demands a yes or no response to a particular proposition. Is not planning often more nuanced than that? By focusing always on the referendum with its
stark yes or no choice, we will miss an opportunity where there is still room for a bit of exploration into the final shape of the plan. However, we are where we are, with a central diktat over every dot and comma.
The LGA reminded us that the Minister at Third Reading pointed out that the use of existing mechanisms for the creation of local government plan documents was an alternative route for a neighbourhood forum to go down—one which would avoid a referendum. Has this route been adopted in any of the front-runner pilots that are under way?
3.45 pm
The Localism Act requires an additional referendum where the draft order for a neighbourhood development order relates to a neighbourhood area that has been designated as a business area. Paragraph 4.6 of the Explanatory Note states that the duties to hold an additional referendum are not to be commenced. Does that mean that no neighbourhood areas are to be designated as business areas, or simply that the requirement for the extra referendum is being put on hold? Either way, will the Minister explain why this is? Do any of the front-runner pilots involve a neighbourhood area that has been designated as a business area?
I have a small question on the procedures in the referendum requirements. Perhaps the Minister will say a little more about the appointment of counting observers in Regulation 19(2). We are likely to be dealing with a referendum that is not fought on party-political lines—although it might be. Is it intended that the observers will include representatives of those who are supporters of the proposition, who will be readily identifiable via the parish council or neighbourhood forum, and of those who take a contrary view? That is the sort of balance one would normally expect to see at a count. Those who take a contrary view might not be formally constituted and may be less easy to identify.
Paragraph 9.2 of the Explanatory Note indicates that further consideration is being given to guidance on neighbourhood planning. Can we have an update on this? If the Government have a one-in, one-out policy on regulations, can we be clear whether this is just one regulation, and what is coming out?
Baroness Hanham: My Lords, I thank those who contributed to this rather short debate. It is an extremely important point—and these are important regulations that set the basis for the processes that will be involved.
My noble friend Lady Eaton referred to the expense of holding a referendum. I was much gratified to have the support of my noble friend Lord Shipley for the proposition that referendums are an important part of the process. The inevitability that some people will not take part in the consultation on the neighbourhood plan or will otherwise be left out cannot be overstated. The process involves neighbourhood forums, and not everybody has to be part of a neighbourhood forum. Although the neighbourhood forums will have to undertake consultations, it is not impossible that some people may miss them—but they will not miss a referendum. It also seems appropriate, as the process is coming up from the grass roots, that the whole of the grass roots should be able to comment.
There are sound reasons for having a referendum. The cost, as we explained, will be borne by the Government until 2015. The Government have provided £50 million of new burdens money. I confirm to the noble Lord, Lord McKenzie, that the new burdens money will be there. That is to make the neighbourhood planning a success, and to ensure that local authorities can fulfil their legal duty to support groups and parish councils. It is pretty all-embracing as to what a new burden involves. As the noble Baroness, Lady Eaton, has said, the costs are estimated at between about £5,000 to £8,000. That, as I say, will be borne by the Government.
On business areas and additional referendums, which the noble Lord, Lord McKenzie, asked me about, it will not be possible to have a referendum of any kind in a designated business area until we make the business referendum rules. Those are not yet out, so these refer only to the neighbourhood planning, not the business area planning.
Lord McKenzie of Luton: Can we be clear on that? I think I understand. Does that mean that there will still be areas designated as business areas, but it is just that the additional referendum will not be part of the process?
Baroness Hanham: The noble Lord’s understanding is correct.
I was asked whether neighbourhood plans always require a referendum. They do under the Localism Act 2011. Under the Planning Acts they do not. It would be perfectly possible for a neighbourhood to put together a plan. As long as it conforms with the local plan being processed under the Planning Acts, it would not require a referendum. If it were done under the Localism Act, it would.
That probably covers the main points. The noble Lord, Lord McKenzie, asked me a couple of others, which I have temporarily lost.
Lord Jones: Would the Minister like me to repeat my question?
Baroness Hanham: I am so sorry; I was shuffling away trying to find this. These are referendum orders for England only. Wales has not indicated that it needs them; if it does, that would be considered separately.
The noble Lord, Lord McKenzie also asked about the guidance on neighbourhood planning. To clarify the position on that, following the publication of the National Planning Policy Framework, planning guidance is now being reviewed with the practitioners to see that it is also enforced. We will be making an announcement shortly about when the guidance will be available.
The counting observers are permitted to view key parts of the election process to ensure that they are transparent. Whether they are individuals or organisations, observers must be accredited by the Electoral Commission. The agents of campaign organisations may attend only those parts of the process that they are specially permitted to attend, such as the counting of votes. The rules for their involvement in the process are clearly set
out. My understanding would be the same as that of the noble Lord, Lord McKenzie: there will clearly be observers for those both for and against.
The Deputy Chairman of Committees: My Lords, I have no doubt that this will not be the last time that we blame the forthcoming Olympics, or at least the Olympic road network. The Minister is unfortunately not fully briefed on the next item of business at this stage. I suggest that the Grand Committee sitting is suspended until 4 o’clock.
3.53 pm
Assets of Community Value (England) Regulations 2012
Copy of the SICopy of the ReportCopy of the Report
Considered in Grand Committee
4 pm
That the Grand Committee do report to the House that is has considered the Assets of Community Value (England) Regulations 2012.
Relevant documents: 6th Report from the Joint Committee on Statutory Instruments, 7th Report from the Secondary Legislation Scrutiny Committee.
The Parliamentary Under-Secretary of State, Department for Communities and Local Government (Baroness Hanham): My Lords, I thank the Committee for its indulgence and I apologise for having had to ask for an adjournment.
The Assets of Community Value (England) Regulations 2012 add the necessary detail to the assets of community value provisions in Part 5, Chapter 3 of the Localism Act 2011. Although these regulations are laid in draft for scrutiny under the affirmative procedure, only the enforcement provisions require this. The remaining powers in the Act are subject to a negative parliamentary procedure. However, it was felt that it would be difficult to consider the enforcement provisions by themselves, and preferable to look at all the details in the regulations together. That is why the decision was taken to combine them in one instrument. The principles of the policy were discussed in detail during the debates on the Localism Act and the Act reflects these. However, for context, I shall briefly recap the rationale for the assets of community value scheme before discussing some of the specific regulations that I am aware will be of interest to the Committee.
Over the past decade, many communities have lost local amenities and buildings that are of great importance to them. Whether it is a village or housing estate shop, pub, community centre or local hall, many assets have gone, often without anyone locally being able to do anything about it. As a result, many communities find themselves bereft of the assets that can help to contribute
to the development of vibrant and active communities. However, on a more positive note, the past decade has also seen a significant rise in communities becoming more active and joining together to save and take over assets that are important to them. More than 200 communities have bought their village shop and a growing number have been successful in saving other assets, such as their pub, from closing. It is exactly this type of community-focused, locally led action that the asset of community value seeks to encourage.
The provisions require local authorities to maintain a list of public and private sites—buildings and other land—that are assets of community value, based on a nomination from their local community. The local authority will list the asset if it considers that it furthers the social well-being or social interests of the community, or has done so recently and it is reasonable to think that it will continue to do in the immediate future. The asset will remain on the list for up to five years. If the asset still meets the definition after five years, it can be renominated and relisted.
If the owner of a listed asset wants to sell it, he must notify the local authority. Community interest groups will then have six weeks to lodge a non-binding expression of interest, in which case a window of opportunity of a further four and a half months—making a total of six months—will come into effect. This will give communities more time to develop a bid and raise the necessary capital. They will then be in a better position to bid for the asset. During the window, the owner may market and pursue discussions about the sale of their asset but may not exchange contracts, with one important exception. The regulations provide that the owner may sell to a community interest group during the moratorium. At the end of the window, the owner will be free to sell to whoever they wish at the price they wish, and for a protected period will not again be subject to delay.
This scheme is not designed to force landowners wishing to sell to do so to some person or organisation they do not wish to sell to, nor will it force them to sell at an inferior price. There is no restriction on the freedom of landowners to sell to whomever they choose after the six months have expired and there is no right of first refusal for community groups.
However, these regulations do provide community groups with a much needed opportunity to prepare a business plan and raise the necessary funds to bid for the asset. I am aware that a number of the regulations within the assets of community value scheme will be of particular interest to the Committee. As such, I would now like to say a few words about some of the detail.
We have set it out in regulations that voluntary and community groups are able to nominate an asset for listing, in addition to the parish council for the area in which the land lies. For the purposes of this scheme, a voluntary or community body will be: a neighbouring parish council, an unincorporated group of 21 or more people on the local electoral register who have come together informally, a neighbourhood forum designated as such by the local planning authority, or a community interest group with a local connection. These are groups which have a formal structure. They
can be: a charity, a company limited by guarantee that does not distribute profits among its members, an industrial and provident society, or a community interest company. However, only a community interest group, which includes the parish council for the area the land lies in, will be able to trigger the full moratorium period as well as nominate land for listing.
With regard to enforcement, to give a strong incentive to owners to comply with the scheme, and to purchasers to make all possible checks, non-compliant sales will be ineffective. The effect of this will be that, regardless of the agreement between the parties and payment, ownership of the land will not have changed hands. The scheme provides a number of mechanisms intended to encourage compliance. These require local authorities when they list land to notify the owner that their land has been listed as an asset of community value and inform them of the implications, enter the fact that the land has been listed as an asset of community value in the local land charges register, and enter a restriction against the owner’s title on the land register where the listed land is already registered.
Local authorities will not be able to apply for a restriction in the land register against land that is not yet registered. However, a purchaser of listed land who applies for first registration will need to apply for the restriction against their own title. The wording of the restriction will mean that the Land Registry will require a certificate of compliance from a lawyer or professional conveyancer before it will register the land or a change of owner. The regulations also require that a new owner of listed land informs the local authority about a change of ownership, and that an owner informs them about first registration with the Land Registry. However as a protection to owners, the regulations provide that the disposal will not be ineffective if the owner did not know that the land was listed, despite making all reasonable efforts. This would be most likely to occur in circumstances where there was delay by the local authority, for instance in notifying the owner of the listing, entering new information on the list, or amending the local land charges register.
As to the compensation provisions in the regulations, they recognise that these provisions may have some financial impact on owners and provide a compensation scheme for private property owners. There is no restriction in the regulations on what type of loss or expense may be claimed, but they state in particular that this may include a claim arising from a delay in entering into a binding agreement to sell that is wholly caused by the interim or full moratorium period; and the regulations provide for legal expenses incurred in a successful appeal against the local authority’s decisions.
Where a local authority considers that compensation should be paid, it is left for the authority to determine how much compensation will be appropriate. The authority should decide how much compensation is fair and proportionate in relation both to loss and expenses, balancing individual rights with community benefit and taking into account all the particular facts of the case.
The Government understand the concerns that were raised by local authorities around this issue, particularly during the department’s consultation. However, when
making decisions around the structure of the scheme, it was clearly important to take on board the opinions of all those affected by the policy, not just local authorities in isolation. It will be important that this scheme remains as locally focused as possible, and for this reason we wish to ensure that the operation of the compensation elements remains with local authorities.
As with other costs incurred by local authorities in meeting new requirements placed on them, we have reflected the estimated costs of compensation within the new burdens funding. The detail is set out in the impact assessment. Additionally, given the concerns raised about this issue, the Government will meet costs of compensation payments of more than £20,000 in a financial year, up to March 2015. This could occur through a local authority receiving either one large claim of more than £20,000 or a number of smaller claims in one financial year that add up to more than £20,000.
The Localism Act provides that owners will have the right to appeal against both the listing of an asset and compensation refusals or the amount of awards. The regulations set out the detail of how these will operate. An owner who disagrees with a listing decision, or an owner or former owner who has made a claim for compensation and is not satisfied with the local authority’s response, may request a review by the local authority of its decisions. The local authority must review its decision and notify the claimant of the result within eight weeks of receiving the request, or a longer period if agreed with the claimant, with reasons. The procedure for both types of review, in Schedule 2 to the regulations, is the same. In either case, if the owner is not content with the local authority’s review then the regulations provide that the owner may appeal to the First-tier Tribunal. The deadline for an appeal of this nature is 28 days from the date on which notice of the decision appealed against was sent to the owner. There is one difference: a compensation appeal may be made only by the person who requested the review, whereas a listing appeal may be made by the person who requested the review or by a subsequent owner. Both types of appeal will be to the General Regulatory Chamber of the First-tier Tribunal which will be able to consider points of both fact and law.
The definition of assets of community value is set out in Section 88 of the Localism Act. The regulations allow for some exclusions from this definition. The principal exclusion from listing at all is residential property. This includes gardens, outbuildings and other associated land owned by a single owner. We have defined associated land widely to mean land in the same ownership that it is reasonable to consider as going with the residence, even where it is separated from the residence by, for example, a road, railway line, river or canal in different ownership. In this context, “same ownership” includes the situation where the land is held by different trusts but was settled by the same settler.
There is an exception to the general exclusion of residential property from listing, which is where an asset that could otherwise be listed contains integral residential quarters, such as accommodation as part of a pub or a caretaker’s flat. Completing the range of
residential exclusions from listing are residential caravan sites licensed by local authorities, together with some similar sites that are exempted from licensing, for example those used by Gypsy communities or by travelling showmen. We have also exempted from listing operational land of statutory undertakers as defined in Section 263 of the Town and Country Planning Act 1990. This covers mainly transport networks such as railways and roads.
A number of exemptions from the assets of community value moratorium rules, including those which protect estates of settled land, are set out in Section 95(5) of the Localism Act. The regulations provide for a number of additional exemptions. To list all of the types of disposals that will be exempt from the moratorium requirements would take even more time than I am taking at the moment, and those in the Act have already been considered during the passage of the Bill, so instead I shall highlight those added by the regulations which are likely to be of most interest.
4.15 pm
Disposals of part-listed land are introduced in the Act, again at Section 95(5)(e), but with some of the detail to be added in the regulations. We agreed during the passage of the Bill that it would be unfair to delay a landowner in selling land if only a part of it had been listed—for instance, one field out of 20. Although the concept is straightforward, expressing this in the legislation so that it will apply the same for registered and unregistered land—that is, with the Land Registry—has required some quite technical wording.
The exemption for part-listed land applies where all the land being disposed of is held under single ownership and every part of the land can be reached from every other part without having to cross land which is owned by somebody else. Interruption of land is only by a road, railway, or waterway placed on land owned by someone else—for example, the Highways Agency—and that will not count.
In terms of other exemptions, several are included for situations where the identity of the purchaser is a foregone conclusion—for instance, under a pre-existing option, or right of first refusal, or under a statutory compulsory purchase order. In such situations there would be no point giving the local community extra time to bid.
We have framed these exemptions to ensure that while on the one hand the scheme is robust, on the other hand it will interfere as little as possible with landowner or business interests.
Finally, the regulations deliver on the coalition Government’s agreement for a community right to bid. This is a power that can be used by the community to help it save and take over assets important to its local area. Used effectively, this will help to ensure the development of thriving community assets and enhance the local well-being of communities across the country. I beg to move.
Earl Cathcart: My Lords, I am a farmer and a landowner. In the recent past I was a Norfolk councillor. I use the words recent past because I stopped being a councillor almost five years ago.
I thank my noble friend Lady Hanham for all the time and effort that she has spent on this issue. The Minister and her team have worked tirelessly to ensure that it hits the intended spot and has no unintended consequences. I am certain that the rural community is most grateful for all the hard work that they have done.
I have no problems with these regulations, but I had hoped that they would clarify two or three issues in the Act, all relating to Section 88. First, land in the existing use category is of community value,
“if in the opinion of the authority … the non-ancillary use furthers the social well-being or social interests of the local community and … it is realistic to think that there can continue to be non-ancillary use”
serving those objectives. This raises two questions, on which the regulations and the Act are silent. I had hoped that these regulations would clarify these matters. First, when is a use non-ancillary and, secondly, what evidence needs to be put before the local authority in determining whether in its opinion a relevant use is realistic?
The second category of land of community value is the land in past use. If in the opinion of the local authority, there is a time in the recent past when an actual non-ancillary use fulfilled the two objectives of furthering social well-being or social interests of the local community,
“and it is realistic to think that … in the next five years … there could be a non-ancillary use”
made that met either of these objectives, it is land of community value.
This “past use” category also raised my third question: what is the recent past? In September 2011, the Assets of Community Value—Policy Statement said that the Government’s view on the recent past,
“is that we will leave it to the local authority to decide, since ‘recent’ might be viewed differently in different circumstances”.
This will cause uncertainty for landowners as the recent past may be the past 10 or 15 years for one local authority and the past two or three years for another. Can the Minister provide more clarity on what is meant by “recent past” so that there is some consistency between local authorities?
If asked my opinion, I would say that up to five years would be a reasonable time, hence my saying, “In the recent past I was a local councillor”. I suggest five years for two reasons. First, the Act already says that,
“it is realistic to think that … in the next five years … there could be non-ancillary use”.
It already uses the five-year benchmark. Secondly, an asset drops off the register after five years anyway. Therefore, anything up to five years ago would be reasonable; anything later would be the distant past. I would be most grateful if the Minister would address those three issues.
Baroness Thornton: My Lords, I have a slight sense of déjà vu. Here we are again discussing this matter, with me supporting the Minister and congratulating her on bringing forward these regulations, as she promised in the course of the Localism Bill. I have one or two questions for clarification.
I agree with the noble Earl that these are quite complex regulations but I also accept what the Minister said. Having read the part about the Land Registry three times, I still do not really understand it and can see that there are some complex interests to balance—those of landowners and those of the legitimate aspirations of local community organisations. That is, as it were, where we came in. I think these regulations do that.
My concern, if I have one, is whether it is too complicated for community organisations to access easily. We will not know that until the whole thing is rolled out and starts to work, or not. Therefore, I ask the Minister whether there is any intention to monitor—in, say, two years’ time—the effectiveness of this legislation and what the issues are for landowners and community organisations.
My second question is on a point of clarification. The Explanatory Notes outline the characteristics of community organisations. I read the Explanatory Notes first because they were more accessible than the regulations. They go into how you recognise what different community interest groups are. Therefore, do the regulations take account of unincorporated organisations? The regulations say that unincorporated community organisations can bid for community assets, which is exactly as it should be. However, if the Explanatory Notes say one thing and the regulations say something else, it is very important that local authorities and those whose land or property is in question are completely clear that unincorporated community organisations have the right to claim an interest in the community asset. It is really a question of clarification, which I am sure can quite easily be resolved. I am assuming that the reasons for which this instrument was drawn to our attention in terms of public policy issues relate to the amount of resources and time that local authorities are expected to put into it. The noble Baroness gave an explanation for that.
Lord Gardiner of Kimble: My Lords, first, I declare my interests as a farmer and landowner as detailed on the register. I echo the comments of my noble friend Lord Cathcart as to the energy and hard work that has been put into ensuring that sense prevails with these regulations following many discussions.
I raise three minor but important points which I hope my noble friend the Minister will help the Grand Committee with. They relate, first, in paragraph 14, to compensation regulation. Owners of listed assets are subject to time limits throughout the assets-of-community-value process; indeed, that is enforceable in law. Yet the local authority is currently under no timetable-limited obligation to respond with a written reason. I wonder whether it would not be reasonable that there should be some understanding that the local authority should be responding in reasonable time; I put that at about six weeks. There may be procedures whereby a local authority should respond, but I would welcome clarification from my noble friend.
The other questions relate to relevant disposals in Schedule 3 and the Crichel Down rules. It gets perhaps rather too technical for me, but my understanding is that, in order to conform with the Crichel Down rules,
there should be in the regulation an inclusion of land acquired under threat of compulsory purchase. Can my noble friend clarify that point?
Finally, I am concerned as to the definition of “undertaking”, and how restrictive that may be, particularly the suitability in terms of transfer between related companies, which particularly relates to farms and estates. I would like my noble friend to assure us that this matter will be kept under review to see whether what I understand is a rather restrictive interpretation of this matter might be addressed in future years if there was a problem, particularly in the rural sector.
Lord Reay: My Lords, I declare my interest as a landowner, and associate myself with what my noble friends Lord Cathcart and Lord Gardiner have said—in particular my noble friend Lord Cathcart in calling for clarification on what is meant by the “recent past”. As my noble friend has pointed out, we debated this at great length during the passage of the Localism Act. The Government listened to the objections that were made at Second Reading and subsequently introduced substantial modifications to the original proposal. This was welcome, and my noble friend made great efforts on our behalf.
We understood where the Government were coming from politically. However, to draw up, maintain and manage a list of community assets is still a substantial bureaucratic requirement for local authorities, with inevitable costs. We wondered whether all of that was necessary in order to provide a right to bid for a local body or group whenever a well loved pub, shop or other amenity was threatened with disappearance. Anyway, that is the system that we have now got in place. At least the eligibility of assets for inclusion was narrowed down to a much more acceptable level from the original proposal. That was a development which we much welcomed, and I thank the Minister again for that.
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Lord Shipley: I shall follow on from the contribution of the noble Baroness, Lady Thornton, on the rights of voluntary and community bodies not just to nominate assets for listing but to convert themselves into a community interest group. My understanding of the regulations—the Minister explained this very clearly—is that voluntary and community bodies can nominate assets for listing and that those bodies will include parish councils and can include unincorporated local organisations with at least 21 individual members who are on the local electoral register.
The regulations require a community interest group which can bid to be a charity, a company limited by guarantee that does not distribute profits, an industrial and provident society or a community interest company. Voluntary community groups are going to have to convert themselves into community interest groups to bid and sometimes the timescale could be very tight. I wonder what help the Government plan to give, or to advise local authorities to give, to enable the regulations and the principles behind the Localism Act to happen reasonably easily and to make it more straightforward
than it otherwise would be for a voluntary or community group to bid successfully and to manage the outcome of that successful bid.
I noticed in the regulations that it is estimated that some 700 assets will be listed each year and that 94 assets may be bid for each year. It is not clear where those numbers came from, but they clearly have some credibility. I understand that where there is a parish council, there is a structure in place. My concern is where there is not a parish council or where the body that wants to bid is not the parish council but is another voluntary or community group. How do we make sure that people are enabled to make a success of this legislation when there is an extra hurdle from nominating a building or a piece of land to an asset register to the point where that group can then take over the running of that building?
Lord True: My Lords, my noble friend anticipates one of the things that I was going to ask in relation to non-parished areas. I was not intending to intervene. I endorse what was said by my noble friend Lord Gardiner and other colleagues. I welcome the efforts that my noble friend Lady Hanham has made to reduce some of the worst threats, as some of us perceived them in the debates on the Localism Bill. The stripping down of the proposal to the essentials, at least in terms of those assets to which it might apply, is very welcome. None the less, declaring an interest as leader of a local authority, in some circumstances, local authorities could find themselves as piggy in the middle in operating this process with a community group on one side and the landowner on the other. We simply do not know how onerous these duties are going to be. Some local authorities find it hard to determine planning applications in eight weeks. There are figures of eight weeks and six weeks in here.
We are adjured to make further major savings in local government spending—we are debating this on the Local Government Finance Bill—to which I have no objection, but as we go forward I hope my noble friend will give a firm assurance that she will be careful of the burdens that are imposed on local authorities in administering the system because the paradox we are living with is that in the planning system we have had a massive simplification, in theory, of the planning system nationwide but on the other hand we are creating extraordinarily complex structures, such as some of those coming out of the Localism Act. In these quite complex regulations, we are having regulations to decomplicate them and take some of the other things out. This world will take a little time to settle down. I think we will all try to make it work. Localism is important, and we do want to protect assets of local importance, but I hope that my noble friend will resist the blandishments of the noble Lord, Lord Gardiner, to tighten up even further the requirements on local authorities to respond.
One has to live with the art of the possible. Local authorities will, within the resources available, try to make this work, but in some circumstances, all the appeals systems, the registers and all the things that have to be done will take time and it may even require the recruiting of new local authority staff in some
areas where this thing takes off. With that rider, I associate myself with the remarks of other noble Lords and thank my noble friend for the time and attention she has given to avoiding some of the potential abuses of the system as originally designed.
Lord McKenzie of Luton: My Lords, I thank the Minister for her very full explanation of these regulations. They relate to legislation that we support, as my noble friend Lady Thornton said, and we wish them to work effectively. A policy to assist local community groups and to preserve buildings or land of importance to their communities and social well-being is clearly important. It is of course not a right to buy, nor is there any obligation on the owner to sell.
As my noble friend and other noble Lords have said, this is a very complex piece of primary legislation, as are the regulations before us. It is to be hoped that that complexity will not deter engagement. There will inevitably be complexity around issues relating to land law and charity law. To a certain extent that is unavoidable, but I hope that some simplified guidance will come out. The noble Lord, Lord True, said it is quite difficult to gauge how onerous the duties on local authorities will be in practice.
A number of noble Lords posed a series of specific questions, and I await the Minister’s answers with some interest. In fact, I wanted to ask some questions myself. The first relates to the right to nominate. The regulations and the Explanatory Memorandum state that a neighbourhood forum is included among those who can nominate. Does that right extend to a neighbourhood forum that is designated as a business area?
Paragraph 7.14 of the Explanatory Memorandum refers to the powers relating to the fact that non-community nominations have not been used. Perhaps the Minister can remind us of what the intent of including such a possibility in the legislation was and why it is not being taken up.
I should also like to understand a little better the exemptions for disposals by one body corporate to another. Specifically, is a disposal of the shareholding of a group company into which an asset has been transferred a relevant disposal for the purpose of these provisions? Clearly if that was not the case, there is a gaping hole in the legislation.
A number of noble Lords touched upon compensation issues. It is clear that the claim for compensation is rightly limited to delay wholly caused by delay under the Act, but if there are joint causes for the delay, assuming that one can apportion the effect of those joint causes, is the part attributable to the delay caused by the Act still capable of compensation; or would the fact that there is another contributory factor, even if the value of it can be stripped out, deny that compensation?
I want also to make sure that I understood what happens as regards the difference between a freeholder and a leaseholder. As I understand it, if there is a freeholder and a leaseholder, the ownership of a lease that was originally granted for 25 years would be
deemed to be that of the leaseholder, because one would look to have one owner for the purposes of the operation of these provisions. If that is right, what would be the position on the grant of a new 25-year lease at the point of expiry of the original lease? Would that be a disposal? How does that work under these provisions?
The Secondary Legislation Scrutiny Committee recites the one-off and ongoing costs, and other noble Lords have referred to that. We have an assurance that those costs are going to be met by DCLG, at least during the course of this spending review. I do not know whether that means that it definitely will not under the new spending review or whether we simply have to wait and see what that review entails. I will be interested in the Minister’s answer on that point.
This is something that we want to see work and we are supportive of the Government in seeking that, but there are a number of technical issues here on which we need to be satisfied that we are not opening up easy routes out of the application of this legislation that the wise, or at least the well advised, will take every opportunity to use.
Baroness Hanham: My Lords, I thank noble Lords for their interest in the regulations. I am particularly grateful for the kind remarks that have been made about them; the Localism Act is certainly one that I will recall for many years as one where we made as much difference in this House as was made anywhere.
There have been a number of quite technical questions, so let me see if I can deal with at least some of them. The costs of the referendums will be new burdens, so until 2015 they will be supported by the Government. The Government are committed to meeting the new burdens on local authorities, and have set aside up to £50 million to 2015 to meet those costs. It is right that we ensure that those referendums take place. I beg the Committee’s pardon, that is wrong; I shall start again.
Regarding my noble friend Lord Cathcart’s question about the use of “non-ancillary”, we talked about this quite a lot during the process of the Act. It has been decided that it is up to the local authority to determine whether the use of building land is non-ancillary. It is the local authority’s job to put these regulations into effect and to be the guiding light. The local authority knows its own area, its own people and its own tensions so we believe that it should do this, and of course first it has to establish whether the building or other land meets the definition of an asset of community value.
On his question about what is meant by “recent past”—here we go. This could be a very interesting and long discussion. Once again, this is something that we discussed during the process of the Act. How long is a piece of string? My definition of “recent past” would be reasonably short and my definition of “not recent past” quite lengthy. However, I am not defining this; local authorities once again are going to be in the position of defining it. Any normal logic would suggest that “recent” would not be 20 years or, probably, even 10 years, but further than that I will not go; I am not going to be committed in future to having said that it was five years, because I have not done so. I see the rationale behind what my noble friend was
trying to adduce, but I do not think that we can give a definition of that. However, anyone who looks up “recent” in the dictionary will quickly get an answer to what “recent” is meant to be.
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My noble friend Lord Gardiner talked about compensation. Again, this has been considered as part of the development of the regulations. After consultation with many people who would be involved, it has been decided that this needs to be light-touch and practical. The proportionate approach is to leave it to be covered by the general duty on the local authority to behave reasonably. Local authorities have such a general duty and can be challenged if they do not fulfil it correctly. They will have to assess how much they should pay. As I said in my opening remarks, the Government will provide support for £20,000 a year, however that is broken up, but it will also be a new burden.
The Crichel Down rules are a whole area of excitement for everybody. I simply tell the Committee that the regulations provide sufficient protection. The definition of “statutory compulsory purchase”, which is covered by Crichel Down, includes acquisitions made under the threat of compulsory purchase powers. Therefore, this situation is included in the Crichel Down exemption from the moratorium period. I hope that that helps my two noble friends.
I thank the noble Baroness, Lady Thornton, for her comments. She and the noble Lord, Lord Shipley, asked about unincorporated groups. To be very clear, voluntary and community groups can only make a nomination. They can nominate an asset for listing; that is their role. Thereafter, the only people who can make a bid or take the process forward are the community interest groups, because they are properly formed and incorporated. As to whether a community group could get itself incorporated in time to take the process forward, I am not sure that they could do so in six weeks. That would probably be a challenge too far. However, there would presumably be no reason why they should not join up with one of those organisations that has already been incorporated. If they have enough interest to list, they have enough interest to take the process forward.
I was asked about nomination. I have just dealt with compensation so I do not need to say any more on that, other than that a local authority will make a decision but can be asked to review any decision that it makes.
The noble Baroness, Lady Thornton, asked about monitoring. The answer is, yes, this will be monitored. There will be a review after three years and all aspects will be taken into account.
The noble Lord, Lord McKenzie, asked me several challenging questions, particularly about a lease and whether a grant would add a further 25 years to it. The noble Lord understands that this is the case only if the asset is freehold or is on a lease that was longer than 25 years when it was acquired. Would a grant of a further 25 years at the end of the existing lease be a relevant disposal? Yes, if it is the lease that is of at least 25 years and is furthest away from the freeholder. I hope that the noble Lord understands that.
I hope that I have answered all noble Lords’ questions. If not, I will make sure that I do so subsequently.
Lord McKenzie of Luton: Will the Minister deal with the issue around intergroup transfers and the extent to which parcelling an asset in a company and selling the shares is caught as a relevant disposal?
Baroness Hanham: That is pretty technical. May I write to the noble Lord about it? It is more technical than I can deal with today.
Lord McKenzie of Luton: I am very happy to have a letter, although I think that we touched on this during the passage of the Bill.
Baroness Hanham: I shall write to the noble Lord.
Renewable Heat Incentive Scheme (Amendment) Regulations 2012
Copy of the SICopy of the ReportCopy of the Report
Considered in Grand Committee
4.51 pm
That the Grand Committee do report to the House that is has considered the Renewable Heat Incentive Scheme (Amendment) Regulations 2012.
Relevant documents: 3rd Report from the Joint Committee on Statutory Instruments, 5th Report from the Secondary Legislation Scrutiny Committee.
The Parliamentary Under-Secretary of State, Department of Energy and Climate Change (Lord Marland): My Lords, before your Lordships is an amendment to the renewable heat incentive regulations that sets out details of a standby mechanism to ensure that the scheme stays within budget in the current financial year.
The non-domestic RHI scheme launched in November 2011. Through this scheme we are already supporting renewable heat installations in small businesses, industry, the public sector and communities. The RHI supports a number of emerging technologies and is therefore helping to support the UK renewables industry. This is vital to making the transition to a low-carbon economy.
The vast majority of the heat in this country is produced by burning fossil fuels. As a result, heat is responsible for a third of the UK’s greenhouse gas emissions. It is imperative that we start the transition to low-carbon heat immediately. We must do this to set the UK on a path to reducing carbon emissions in the long term and to contribute to our share of the global effort to combat climate change.
As set out in The Carbon Plan, we will need virtually to eliminate greenhouse gas emissions from our buildings by 2050 and we need to see deep reductions in emissions from industrial processes. By 2020, 12% of our total heat demand will have to come from renewables, increasing from 2% currently. This means that we need to find
alternatives to fossil fuel for our heating. The RHI, which is the first scheme of its kind in the world, is an essential part of helping us to achieve this.
However, we have learnt lessons from FITs. The RHI must be financially sustainable and help to deliver renewable heat in the most cost-effective way and it must be able to deliver consistent support to the industry. These regulations will help us to keep within the budgetary limits set by the comprehensive spending review if uptake is greater than we expect. They will safeguard against the possibility of overspend in the current financial year and against the detrimental impact on the supply chain of a reduced budget next year that would be caused if we spent this year’s budget.
We have set out in these regulations that the standby mechanism would suspend the scheme at 97% of the budget limit, with one week’s notice. If our forecast shows that we expect to spend £67.9 million in 2012-13, we would give notice of suspension and the scheme would be suspended one week later. To ensure that investors are able to monitor progress towards the suspension trigger, we will make estimates of committed expenditure available each week. Furthermore, if we expect to suspend the scheme, we will announce informally one month before we estimate that the scheme will need to close.
This is a precautionary measure. We do not believe that rapid cost reductions are likely in renewable heat technologies in the way that has been seen with solar PV. However, there is a high degree of uncertainty about how the market will respond to the RHI. Therefore, we must be cautious and prepared for unexpected changes in application rates. If RHI spending were to exceed budgets, it would be difficult in retrospect to justify a lack of action now.
Alongside these regulations, I am pleased to inform the Committee that on Friday 20 July the Government published the consultation Renewable Heat Incentive: Providing Certainty and Improving Performance. This consultation seeks views on our proposals for a longer-term budget management mechanism, which we are expecting to implement by the beginning of the 2013-14 financial year.
These regulations will therefore ensure that we have a standby budget management mechanism in place this summer and they will provide clarity and assurance about how we will manage the budget prior to our implementation of a longer-term cost control mechanism. I therefore commend these regulations to the Committee and beg to move.
Lord Teverson: My Lords, I welcome the foresight that these regulations bring. We certainly do not want a repeat of the solar PV issue, where we had a lot of changes at very short notice and a lot of confidence went out of the market. I note yet again that we remind ourselves that some 12% of heating needs to become renewable to meet our 2020 target, as the Minister said. Heating is a largely unrecognised but major part of our energy consumption, in households in particular, and has to be decarbonised by 2050. The irony of this is that, as the Explanatory Memorandum
states, at the moment we have, if anything, underdemand for this initiative. Given those targets, it is quite important that we move it forward quickly.
I have some questions for the Minister. First, why does he think that the scheme has been relatively slow so far? I know that there is a learning curve and it is still relatively young. Can he give us some idea of the types of scheme that have been approved so that we can understand them a little more? Do the Government have plans to stimulate these schemes if demand remains low? Lastly, will he give us a view, even at this early stage, of what lessons have been learnt for rolling out this scheme for domestic RHI, to which we all look forward very much?
Lord Whitty: My Lords, I have two quick points, one of which is fairly forlorn. The Minister referred to the ambition to raise the level of renewable heat to 12% from its current level of 2%. I commend and support that objective—it is right that we should give special provision for renewably sourced heat—but the overall objective is, of course, carbon saving. An awful lot of fossil-fuel-generated heat or dual-fuel heat is currently going to waste. It really ought to be part of the Government’s strategy, perhaps at a lower rate than the subsidy for renewable heat, to ensure that we maximise the use of the heat that is generated from fossil fuel, because the more widespread and efficient use of CHP and trigeneration will achieve larger carbon savings than the current targets for renewable-based heat. That is not to say that we should not do what the noble Lord is suggesting and which these regulations seek to implement, but there seems to be a lacuna—if you can have a lacuna in a suite of measures—in this respect.
With regard to the regulations before us, the Minister said that he has learnt from the FITs experience, and to some extent he has, but in these regulations and in what, at a quick read, is proposed in the consultation paper, I am not sure about giving much confidence or certainty to the market. Certainly, the Government are not avoiding sudden changes of policy. A week’s notice of the budget running out is likely to put off not only people who have gone some way through the process but those who are likely to apply the following year.
It has always seemed that annual budgets, no doubt imposed by the Treasury, are the department’s main problem. Under the solar energy part of FITs, in retrospect the take-up was too fast and the level of subsidy too high. However, as the noble Lord, Lord Teverson, said, the take-up of these RHI provisions has not been as great as the Government wanted. It would surely be better to manage the market according to a total amount rather than an annual budget, so that things would not be stopped half way through development because the budget has run out. Instead, the budget should be brought forward if it has been overspent or carried over into the following year if it has been underspent. That could be linked to the expected take-up.
The current mechanism has an annual budget that stops projects that might otherwise take off within the aggregate budget—for example, over the CSR period. There can also be overshoots, as happened with solar
power. Once again the outcome was to cause uncertainty in the industry and to stop projects that were on line under existing rules and which had qualified under the regulations. This scheme is falling into the same category, although probably with less disastrous effect. If we are to maximise and smooth over the take-up of a new technology, we need to provide some degree of certainty over a minimum of two or three years rather than have a cut-off point with an annual budget.
In the medium term it would not cost the Treasury any more but it might make Treasury accountants a bit nervous. In terms of the objectives here, if we cannot have at least a three-year budget run in which we do not stop projects half way through their development, we will not achieve our objectives. I hope that the outcome of the consultation process produces something like that for the period starting in 2013. This does not do that and could put off a number of worthwhile projects.
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Baroness Worthington: I thank the Minister for introducing this statutory instrument. This is a policy that we support. We hope that the regulations will be quickly implemented. There has been a slight delay, so the sooner we can get on with it the better. I will start with a general comment on renewable heat. The atmosphere does not care where we make our carbon savings. It is incumbent on us as Governments to realise the most cost-effective savings. We have neglected carbon reductions in the heat sector for too long, so these are very important regulations to help start, from a very low base, an industry in renewable heat.
The noble Lord, Lord Teverson, asked a couple of questions that I will add to. It would be interesting to see what has come forward so far, and to hear from the department why the take-up has been relatively slow. The area has been neglected for many years, so perhaps it is just a question of starting up. However, there are some issues to do with the design of the instrument that may be holding back take-up. The first is the question that my noble friend Lord Whitty raised about the industry perceiving a lack of clarity or certainty. Annual budgets are not ideal. We strongly recommend the introduction of minimum three-year rolling budgets. It is clear in the documents before us that we will not exceed the budget this year. If anything, we will see a shortfall, even of the reduced budget. We are reducing the budget by £38 million and we are not likely even to spend that, and it therefore seems odd that we are focusing on a piece of legislation that is not really needed at the moment. What is needed is a much greater effort by the Government to promote the mechanism, and confidence in it so that we start to see an uptake.
I have a question about where the £38 million that has been saved is to be spent. I suspect that the Treasury will claw it back, but could the money not be used to help promote uptake in this sector? I have no doubt that the sector will contribute to the UK’s return to growth. The CBI’s recent report into the contribution that green energy makes to the UK’s growth was very well received and researched. It estimated that a third of growth is green, and I therefore see no
reason for the Government not to put their efforts behind these sectors and new technologies that can help to reduce our trade deficit, boost our economy and employ people.
Although I did not want to go on for too long, there is another question around the future visibility of the budgets. I have spoken to a potential investor in a large energy-from-waste CHP plant who says that for such projects not knowing what the budget would be post-2015 simply means that it would not be possible to get sign-off on that project. The fact that there is no visibility at all of what the budget would be post-2015 will cause delay and prevent that potential investor making that investment. That issue needs to be addressed.
That is all I will say for now. This is an important sector. It is far more efficient to use renewable energy, particularly biomass. With such heat, you do not see two-thirds of the energy wasted up the chimney, as happens in a coal-fired electricity plant. This sector needs to be supported and we would like the Government to do more to make sure that there is a good uptake and that we hit those targets of 12% renewable energy in the heat sector. We support the regulations and look forward to the market developing over time.
Lord Marland: My Lords, I am, as always, grateful. It is a common theme among those of us who debate the energy sector that we agree on many things. I am grateful for that.
The noble Lord, Lord Teverson, compliments the Government on their foresight in this issue. He is a man of deep knowledge and insight. We are grateful for his words. He asked what he called a couple of questions that turned out to be three, but mathematics may not be the noble Lord’s strong suit. I should just point that out.
The most important and relevant thing here is that this RHI scheme is the first of its kind. That is just one, I should say to the noble Lord, Lord Teverson. There will therefore be an element of trial and error, and we will have to learn from the FITs situation and make sure that we have escape routes if the situation gets overheated. That is surely and simply good housekeeping in terms of the regulations. The noble Lord asked what the take-up of the scheme has been and what types of businesses have been involved. It was a rhetorical question because the noble Lord is closer to these industries than I am but, as he knows, a lot of people in agriculture are heavily committed. I understand that a company that makes umbrellas has taken up the scheme. A wide cross-section of people has done so. In order for noble Lords to go away with a heart full of hope, the statistics are that by 11 July, Ofgem had received 670 applications, of which it had accredited 128. Ofgem had rejected four—therefore, not too many. The breakdown is: 517 biomass, two biogas, 34 solar/thermal, three biomethane and 53 heat pump schemes. I hope that that adds up to 670.
The point is that it is not about money. It is not about whether the cost is £17 million, £38 million or £50 million, but about the number of schemes that are taken up. They could be small schemes, but I think that the figure of 670 represents a pretty good stab at things. We are hoping that 2,000 might be taken up.
I am sorry if the noble Lord, Lord Whitty, is forlorn, although he is also wise. He is quite right: carbon savings are critical and we must be committed to them. I applaud his comments about making use of heat wastage and coming up with plans that maximise heat so that we can convert. That is fundamental good housekeeping and we are committed to that.
He says that we should have a lacuna suite of measures, which is a bit lost on me, but we have room for explanation later. He makes the point that we can turn the tap off with a week’s notice. In fact, it is a month’s notice. We will advise people a month ahead that we are getting to the end of the spending year and that they should be prepared. That does not mean that they cannot apply for the following year, which is entirely acceptable.
I do not disagree with the noble Baroness, Lady Worthington, and the noble Lord, Lord Whitty, when they talk about having perhaps a rolling budget or a rolling figure, but before committing to that I would like to introduce them to some Ministers and officials at the Treasury. A day spent there will help them realise that that is not the type of thing towards which they will be disposed.
I thank the noble Baroness, Lady Worthington, for offering her support. It is important for government and for the energy industry that both parties are seen to be supporting the right things. I agree with her that what we do must be done with confidence and that we must send a clear message to the sector about we are doing. Learning from past mistakes and acting upon them send a clear message that we are listening and learning, and that we have seen how things go wrong and are acting upon them. That is what we are doing with this legislation.
Baroness Worthington: I understand the need to learn from mistakes. I take very seriously the Minister’s comments about the Treasury. It is apparent today in the newspapers that there is a divide within the coalition Government over the right way forward. When we think about how we hit our carbon targets, let us think about least cost but also look at what is happening and what is being supported by the market. These budgets are very small. Seventy million pounds is not a lot of money in the grand scheme of things. Growth potential is actually great. Instead of being rigidly attached to these budgets, let us have a rational discussion: if something is going well and carbon is being reduced, we should not be counting pennies and penny-pinching at the expense of an industry that has great growth potential. I urge that we do not get too obsessed by these small-scale budgets, but think about the bigger picture. If things here are succeeding that is good. We do not want to cut things off just because they are becoming successful.
Lord Marland: I am grateful to the noble Baroness, Lady Worthington. The reality is that in times of greater largesse these things would be considered, but we are not in such a time. We are in a very tight fiscal time. In such financial circumstances, the Treasury has to be careful and clear about what we spend annually. There is no conflict between the Treasury and our department about this. We understand the fiscal rigour that needs to be put into this mechanism. We are
giving plenty of support to this take-up. As I indicated earlier, we are satisfied with the number of people who have taken this up, but in financial terms we have not had the take-up that we would have liked. In an ideal world we would have liked that. Unfortunately, at the moment the world is not ideal, but we continue to press on.
Electricity and Gas (Smart Meters Licensable Activity) Order 2012
Copy of the SICopy of the Report
Considered in Grand Committee
5.14 pm
That the Grand Committee do report to the House that is has considered the Electricity and Gas (Smart Meters Licensable Activity) Order 2012.
Relevant document: 6th Report from the Joint Committee on Statutory Instruments.
The Parliamentary Under-Secretary of State, Department of Energy and Climate Change (Lord Marland): My Lords, by the end of 2019 every home in Great Britain will have a smart meter and an in-home display, empowering people to manage their energy consumption and reduce their carbon emissions. The rollout of smart meters will play an important role in Great Britain’s transition to a low-carbon economy and help us to meet the long-term challenges that we face in ensuring an affordable, secure and sustainable energy supply. This is a huge and challenging project. It is the largest changeover programme in the energy industry since the introduction of North Sea gas about 40 years ago. It will result in the installation of about 53 million meters in Great Britain, involving visits to some 30 million homes and businesses.
There would be little point in such an undertaking without it bringing very real and substantial benefits. Our impact assessments show estimated net benefits of about £7 billion over 20 years. Smart meters will give consumers near real-time information on their energy consumption to help them control their energy use, save money and reduce emissions. They will bring an end to estimated billing, and switching between suppliers will be smoother and faster.
The rollout of smart meters will be led by the energy suppliers, but the Government are playing an essential role to establish the necessary framework, of which the order is a fundamental part. The communications and data transfer and management required to support smart metering are to be organised by a single new central communications body, referred to as the Data and Communications Company. The DCC will be an entity regulated under licence by Ofgem. The intention is to re-compete this licence periodically to put downward pressure on costs.
The DCC will provide a service of remotely communicating with smart meters on behalf of electricity and gas suppliers, electricity distribution companies, gas transporters and third parties authorised by the consumer. It will also provide services to other third
parties authorised by the consumer, such as energy services companies, helping to open up that market. The DCC will play a key role in supporting a competitive supply market by delivering a single system that will support easier switching between suppliers. The DCC will not operate these services itself but will contract with data and communications companies for their provision. These contracts will, again, be re-competed periodically. This model delivers the necessary security and interoperability required for the smart meter system. Security is critical, given what the DCC will do, and achieving interoperability ensures that consumers are able to switch energy supplier without the need for additional costly meter changes. This model is strongly supported by the industry.
The order introduces a new activity into the lists of those requiring licences under the Electricity Act 1989 and the Gas Act 1986. It will be unlawful to undertake this activity without holding a licence. The activity is inserted into each Act, but the provisions make it clear that the holder of a licence under one must be the holder under the other. There will be one active licensee at any one time and its licence will be granted for 12 years. A competitive process will be used for granting the licences and an order to set out the process will be made once the order that we are considering today has been made. We have consulted on a draft of the licence, which is available on the department’s website.
We have described the licensable activity in the order as something that only the DCC will be doing—that is, making arrangements with domestic suppliers to provide a communications service for smart meters. This is defined as narrowly as possible to limit the potential for other persons to be caught in its scope. However, in the period before the DCC is established and able to offer services, other persons will be active in the market to support early smart meter installations. We want to support this as part of the foundation of the smart metering programme, which will provide important information and learning for the mass rollout. We have therefore included a transitional exemption, lasting for 36 months from the date the order comes into force. This allows time for the DCC to become established and supports the foundation stage.
To conclude, the Government have consulted on the broad approach to the regulation of the DCC and in detail on the licensable activity for the DCC set out in the order. Our stakeholders support the approach that we are taking. I beg to move.
Lord Reay: My Lords, according to the information in a footnote on page 23 of the impact assessment, only 0.5% of households today have smart meters. From this tiny base, the coalition has committed itself to a rollout to 100% of domestic households by 2019, as the Minister explained—an enormous undertaking.
One of the purposes of this policy seems to be to reduce demand. On page 9 of the impact assessment, the Government include in the list of objectives for the policy,
“facilitating demand-side management which will help reduce security of supply risks”.
It is presumed that customers will be enabled, and will choose, to reduce their consumption of gas and electricity when they discover how much each appliance they use
contributes to their total bill. At the same time, suppliers will learn and be able to observe much more about their customers’ usage of gas and electricity. Will this make it easier for them to control supply—for example, to ration it selectively in the event of electricity shortages? As far as I can see, the Government do not discuss this in the impact assessment. They have no interest in drawing attention to the possibility of future shortages of electricity, even though—perhaps because—some of us think that this is the likely consequence of their energy policy.
The impact assessment represents the cost of the rollout as being in the region of £10 billion. Many meters that have a long and useful life ahead of them—so-called stranded assets—will be replaced. These costs will presumably be added to consumers’ bills. I do not know whether the Government have estimated how much they will add to the bills of individual customers, both domestic and industrial.
The Explanatory Memorandum describes the new body to which my noble friend referred. It will be regulated by Ofgem and established as the Data and Communications Company. Although described as a company, I imagine that it is classified as a quango. Perhaps the Minister will confirm that.
Lord Teverson: My Lords, it is always good to have smart meters on the agenda in this House. They are a very important and often misunderstood area of energy policy. The great thing about them is that, if they are really smart, we could have a smart grid. We hope that that will be the case following the rollout. The sort of decisions that the noble Lord, Lord Reay, mentioned could then be made by the meter, rather than by people. That is where the big benefits will happen. The point is not so much to reduce demand as to reschedule it. That will mean major reductions in investment.
As the noble Lord, Lord Reay, knows, Ofgem estimates that some £200 billion of investment in the energy networks is required. That seems a Soviet-style level of useless investment; I am sure that he would agree that we should not invest for investment’s sake in assets that stay largely unused for a large proportion of the time. A smart grid would enable us to reduce that investment considerably and to use electricity far more intelligently and intensively, as any commercial and private business would. My concern is that the smart meter rollout should enable that, rather than prevent it. That is why it is so important to have that level of investment; it really does bring savings down.
The Minister said that energy companies are one of the big savers on smart meters. The estimated readings that plague my electricity bills will no longer be necessary, nor will inspection. I would like to understand the Government’s thoughts on how they will make sure that the industry’s benefits are brought back into consumer bills.
When I read the order, I found it quite difficult to understand how DCC was anything other than a non-departmental office and, as the noble Lord, Lord Reay, said, effectively a quango. It is a monopoly by statute that does nothing but allocate contracts and yet it still seems to be a private company. I am not sure
what the appointment process is. I would be interested to understand it. I still do not understand why it is necessary, but perhaps the Minister will come back to me on that if I have failed to understand from his opening statement.
I am very pleased to have his reassurance that DCC will not get in the way of other operators. One of the increasingly important areas of activity within corporate business is energy management contracts, for which you need a lot of data communicated to you from very dispersed factory plants, not just nationally, but perhaps globally. I hope that that will not be stopped by this. I would like to understand exactly what DCC has a monopoly of. I guess that it has a monopoly of putting out contracts to do the readings. Presumably the companies that do that do not contravene the secondary legislation. It seems a strange way of going about things.
Finally—I did not enumerate the number of questions that I was going to ask just in case I got that wrong, but this is my last one, so the Minister can intervene on me if there are any more—what happens to places, perhaps not far from me, that do not have mobile phones, GSM network capability or other communications? How does that work? They are usually rural areas, but perhaps there are others. How will the Government make sure that they get the benefits of this system?
Baroness Worthington: I thank the Minister for his introduction to this statutory instrument. I believe it is the first of a number that will be coming forward on the smart metering policy, which we support. It is good to hear the Minister reaffirm that by 2019 every home will have a smart meter. However, there are still some questions we would like to have clarified about exactly how smart those meters will be. I shall come on to them.
The first point I want to raise is that today we have received the report from the Energy and Climate Change Select Committee that has been doing pre-legislative scrutiny on the draft Bill. I urge the Government to join up the dots between these processes. RWE npower gave evidence to the Select Committee and clearly pointed out that if we emphasise demand management within that Bill, this smart metering spend could be money wasted. The amount of money proposed here is not insignificant and some of the benefits will not come to fruition if we carry on down the supply-dominated route which, at the moment, the energy Bill seems to be doing. We keep hearing reassurances from the department that work is going on on the demand side, so let us see some of the detail. It should be being done in parallel with the draft Bill, and the earlier it can be published, the better. Noble Lords have mentioned that we are seeking mechanisms to enable us to manage demand so that we do not have hard-to-meet peaks in demand that cause us to keep a huge amount of spare capacity in the system. It is often the most carbon-intensive and expensive to bring on, so smoothing out that demand profile is a real prize. Done well, smart metering will enable that, and that is what we all want to see. The time-of-use tariffs that smart metering could enable are a great prize. Time-of-use tariffs are available today but they are not smart or dynamic; they are the
Economy 7 of decades ago. We need to see a modern set of tariffs based on time of use so that we can smooth out the demand as well as using the demand to back off when we have large amounts of renewables on the system. That is a prize worth having, which is why we support the Government’s moves towards enabling this rollout.
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I have a couple of specific questions. Could the Minister update us on the trials that are under way on the use of different wireless protocols and frequency services? This may help to answer the question from the noble Lord, Lord Teverson, about just how this is going to work. We hear that there are some questions about what frequency might be viable for communications. We are also concerned that using mobile phone-enabled technology could involve quite expensive usage charges, so it would be great to have a few words on that.
The type of meters that qualify for this policy will be very important. I understand that the Government are allowing companies to get ahead and start installing meters before we really know exactly what the specifications will be, but that incurs a risk. The documentation before us says that the risk is being undertaken by the companies themselves, but really it is the consumers’ risk. After all, if the companies install the wrong equipment or it is not compatible with the eventual system, that could preclude those customers being able to gain all the savings and realise the benefits. We argue that the rollout should actually be capped; it should be allowed only for trials, rather than for a mass rollout of a technology that might turn out to be completely different from what we eventually decide to roll out.
I understand that a lower-specification meter has been included within the early rollout. We do not really see the justification for that. We need to have one specification and it should be the best one for the job, enabling all the benefits as outlined in the regulatory impact assessment.
Going to back to the detail of the instrument, other noble Lords have raised the question of the status of the body that is being created, and it would be good to hear the justification for why it is not seen as a quango. We await those answers but otherwise we definitely support the initiative and look forward to further instruments coming forward.
Lord Marland: My Lords, I thank noble Lords for their contributions. I particularly welcome the noble Lord, Lord Reay, whom we have missed from our debates of late. I am glad to see him back with, as always, his resumé of the industry from his viewpoint. He is right in many of the things that he says—5% of the country have smart meters and there is an awful long way to go—and he makes the same point that the noble Baroness has just amplified about the companies that are out there installing smart meters that may become redundant because of the smart meter that the Government eventually approve. I think that the noble Baroness answered the question for me: she said, quite rightly, that it is at the companies’ own expense. They have to behave responsibly, and Ofgem and others will
ensure that they do. If they have supplied the wrong smart meter, they will have to put the right one into homes.
That links up slightly with my noble friend Lord Teverson’s point about the energy companies’ savings. Yes, this will mean big savings for the energy companies. It will save them having to send a man to check the meter every quarter, to argue over bills and to send money back and forth through the post, thus improving their cash flow, and this is a good thing because we want to ensure that this is passed on to the consumer, and indeed, it will be. We often wrongly criticise our energy companies; they are very much under the microscope; they are regularly scrutinised, they rarely get away with anything and they make a great contribution to the sector. If they make windfall profits out of this, it will be spotted early on and dealt with.
A number of noble Lords mentioned the key point about whether this was a dreaded quango, following the bonfire of the quangos that we have seen. This is not a quango. It is a private sector company that will be responsible to Ofgem. It will have no relationship with government and quite rightly will be set up, as I said in my admittedly exhaustive opening gambit, to manage data transfer and a communication system, among other things. We need a specialist in the field and such a specialist will be appointed under the terms that I referenced.
My noble friend Lord Teverson made a critical point—one of at least four that he made—about how we will get communications into some remote areas. This is a big challenge. The DCC will have to ensure that it happens; that is part of its remit. As the noble Lord rightly said, it is no small challenge if we are to get to our 100% target.
Again, I express my gratitude to the noble Baroness, Lady Worthington, for her fundamental support for the smart metering process. She rightly drew to our attention—as she had done on a few occasions previously—the issue of demand management, which should be at the heart of everything that we are trying to do. If we reduce demand we will reduce supply and therefore bills. Smart metering is at the heart of demand management.
The noble Baroness referred to the type of meter. It is being designed at the moment and will have to meet universal approval. She also referred to the protocol frequency. We are carrying out a number of trials and have not yet come to a definite answer. Clearly it will have to be a bespoke and dedicated frequency, and it will come as no surprise that those trials are being carried out. I hope that I have satisfied the thirst for answers and commend the order.
Lord Teverson: The noble Lord knows that he has my complete support for this measure. However, I still fail utterly to understand how the DCC adds value. It will have to be controlled by Ofgem or the department. If it is to negotiate with suppliers, it will have to have its budget controlled and its performance and value very carefully monitored. At that point the situation is like that of the former Strategic Rail Authority. In the end the government department decided not to have an intermediary because it could do things better itself.
The East India Company was a private company that ruled half the British Empire—but I suppose that is not what this organisation is supposed to do. I do not get it. I hope that the noble Lord will forgive me, but I find it difficult to understand why we have this extra level of organisation that must then be controlled further up by the department, because it involves money and at the end of the day that will be reflected in bills.
Lord Marland: The noble Lord is quite right to challenge this. I come from a school that does not think that the Government are the right entity to run many things, although they are very good at coming up with policies. Our department is straining at every level to manage the huge challenges that we have at the moment, and we are very happy to put up our hands and say: “We are not experts in data transfer management. We are not experts in promoting competition through the market. We are not experts in providing emergency services when things go wrong. We are not experts in the enablement of the national grid”. Those are a number of things that this entity will be set up to do. I am very happy, incidentally, to write a more expansive note.
Lord Teverson: The Minister has answered my question quite appropriately.
Lord Marland: This is friendship on a very high level; I think all those in the Room will know this. With that, I will quit while I am ahead.
Electricity and Gas (Energy Company Obligation) Order 2012
Copy of the SICopy of the ReportCopy of the Report
Considered in Grand Committee
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That the Grand Committee do report to the House that is has considered the Electricity and Gas (Energy Company Obligation) Order 2012.
Relevant documents: 3rd Report from the Joint Committee on Statutory Instruments, 5th Report from the Secondary Legislation Scrutiny Committee.
The Parliamentary Under-Secretary of State, Department of Energy and Climate Change (Lord Marland): My Lords, there is no rest for the wicked. Judgment has been passed.
One of my department’s key priorities is reducing carbon emissions by tackling energy-inefficient buildings which are needlessly—
Lord Reay: On a point of order, is the Minister now going to deal with the next four items of Business all together?
Lord Marland: Yes. I am extremely grateful to the Committee for allowing that to happen.
The four statutory instruments, which I am about to explain, before the Committee today go a long way to help achieve this. They establish the legal framework that underpins the Green Deal and energy company obligation policies, and give the industry the green light to bring the Green Deal energy efficiency market into operation.
I will briefly describe the purpose of each of these statutory instruments. First, the Draft Green Deal Framework (Disclosure, Acknowledgment, Redress etc.) Regulations 2012 create an authorisation regime to regulate the conduct of key Green Deal market participants. They also include conditions that must be met when a Green Deal plan is established and how it should be disclosed. Secondly, the Draft Green Deal (Energy Efficiency Improvements) Order 2012 sets out sources of energy and types of microgeneration measures for the purpose of defining “energy efficiency improvements” in the Energy Act 2011. Thirdly, the Draft Green Deal (Qualifying Energy Improvements) Order 2012 sets out the energy efficiency improvements that can be installed under a Green Deal plan.
The Draft Electricity and Gas (Energy Company Obligation) Order 2012 places three obligations on energy suppliers who have more than 250,000 domestic electricity and/or gas customers and have supplied more than the specified level of energy in a relevant period: first, a carbon-saving obligation; secondly, a carbon-saving community obligation; and, thirdly, a home-heating cost-reduction obligation.
The ECO has been designed to work together with the Green Deal as a joint policy to address barriers and market failures in the energy efficiency market. The Government-backed Green Deal programme will help bill payers make energy-saving improvements to their homes. Through the Green Deal, people will be able to pay for some or all of the work done with the savings expected to be made on energy bills. The ECO will require energy suppliers to promote energy efficiency measures to those most in need and for properties that are harder to treat, helping to reduce emissions and make progress on fuel poverty. I am therefore grateful that the Committee allowed these statutory instruments to be debated as a group.
In November we published our draft legislation and consulted on the Green Deal and ECO policy. We received over 600 responses to the consultation and, in light of these, several policy changes were made—in particular, strengthening consumer protection. We want to ensure that robust consumer standards are met, creating a market that balances consumer protection and burdens on businesses. Changes include improved consumer protections such as restrictions on cold calling and new rules requiring Green Deal participants to declare any ties to other Green Deal participants, including fees or commissions payable. We also strengthened protections for lower than average energy users.
In addition we revised the design of ECO. The energy company obligation will commence in October 2012 with energy suppliers required to deliver against their targets by 31 March 2015. There are no interim
targets, so it is up to the energy suppliers to decide how and when they start delivering. For the first time, there will be transparency of reporting the actual costs of delivery. We changed ECO to allow more hard-to-treat cavity walls to qualify for support. These changes will help the insulation industry take advantage of the new market opportunities created by Green Deal and ECO.
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We have also increased the amount of support for low-income and rural areas to help to tackle fuel poverty. An increased focus on poorer areas should see an extra 100,000 households in low-income areas benefiting each year compared to our original proposals. This brings the total number of low-income households and those in low-income areas assisted to around 250,000 a year. Subject to parliamentary approval, we are on track to have the Green Deal authorisation framework and the ECO obligation in place by October 2012.
Stakeholders have advised us that they support a managed, tested and careful introduction of the Green Deal. Given the scale of our ambition, it is right that we back this approach. We will continue to work with delivery partners to introduce the Green Deal with an early period of focused testing which will build into full national systems testing.
I firmly believe that the green economy is key to economic growth, and this policy has a significant role to play. I commend this order to the Committee and beg to move.
Lord Dixon-Smith: My Lords, I am very grateful to the Minister for describing together the four orders we have before us. It saves me the trouble of trying to do so, and I would probably make a mess of it. I should say—perhaps we all ought to say this when we speak on this order—that I have a house that is pretty energy-inefficient so, in a sense, it could be argued that I have an interest in the outcome of this debate, but it is not a direct interest of the sort that is normally declarable.
I have a particular interest in speaking on the first two orders on the Minister’s list—the energy company obligations order and the Green Deal (Qualifying Energy Improvements) Order. I should say that I have had a letter from the Glass and Glazing Federation that has steered my remarks. It has a particular concern, which I shall come to. To put this into context, we need to recognise that 23% of all heat lost from buildings goes out through the windows. It is perhaps much more significant that 85% of all houses have windows that are less than grade C quality, which is the medium on the quality scale where grade A is ideal and C is the medium. The reason that the glaziers have been in touch with me is that they have particular concern about double glazing and a part of the energy company obligation. Double glazing is not specifically mentioned in the list of qualifying improvements. That may just be a peccadillo. Replacement glazing and secondary glazing are mentioned. To the extent that double glazing could be replacement glazing, I presume that it is included. I have no doubt that the Minister will tell me that that is so.
Much more important is the issue raised in the Electricity and Gas (Energy Company Obligation) Order where the conditions under which the improvements can be undertaken are set out in Clauses 15, 16, 17 and 18. What has concerned the glaziers is Article 16(5), which says specifically:
“Where a qualifying action or adjoining installation is a glazing measure, a supplier must only calculate the carbon or cost saving which exceeds the saving which that measure would achieve if installed to the minimum standard required by, as applicable, Approved Document L1B”,
and so on. One wonders why glazing is mentioned specifically. Everything else on this comprehensive list, which is very welcome, is okay, but glazing is specifically mentioned. The effect of this in its past interpretation, and it may be that the department is going to place a different interpretation on it, has been that energy-efficient improvements will be counted only from the C rating up, even if a householder changes from a poor single-glazed window to an A-rated double-glazed window. In other words, this is going to hit the 86% of houses that have the lowest-grade windows because their improvement will not count until it reaches grade C, if this wording is correct and if I am correctly informed, and I am quite prepared to admit that I may well be misinformed. If that is the case, this is a significant matter for the glazing industry and indeed for the principle of what we are trying to achieve with the Green Deal. We are going to disadvantage a lot of the less well off households because that is where the vast majority of poor-quality windows will exist.
Will the Minister agree at least to look at this issue? I do not expect him to be able to say that there is an instant answer that he can give me today. In fact, today we are approving these orders because we can do no other, so there is nothing we can do about this issue, which I rather regret; it would have been nice if I had known about it three months ago. We need to think seriously about this issue. According to the Glass and Glazing Federation, it looks as if there is a bit of a chink in the order and it would be better if that did not exist.
Lord Reay: My Lords, the Green Deal seems to be a ferociously complicated and expensive bureaucratic edifice. It has the laudable objective of improving the energy efficiency of existing British homes and other buildings without requiring the taxpayer to fund it. If I understand the impact assessment correctly, the cost of the energy company obligation will be recouped by suppliers from customers’ bills generally, so that is a further cost to the consumer. As for the amount, I saw different references—a reference to a cost of £1.3 billion a year on page 187 of the impact assessment, but a reference to £540 million a year in the letter from the Minister that appears at the back of the report of the Secondary Legislation Scrutiny Committee. I do not know if the Minister might be able to comment on those figures.
The take-up of the scheme is of course unknowable. Much will depend, as the Government point out on page 131 of the impact assessment, on the trust that people learn to put into the scheme. Plenty of things could go wrong to affect or even destroy confidence and trust.
Two of the advantages of the scheme are said to be the saving of the CO2 emissions as a result of less electricity being used, and greater thermal comfort for householders through enabling them, for the same cost, to enjoy high temperatures in the homes. However, each of those objectives is achievable only at the expense of the other.
I will refer to some interesting paragraphs on page 89 on the subject of health. The impact assessment correctly points out that the scope for improving health by alleviating cold living conditions is considerable. However, it goes on to point to the growing concern that the removal of ventilation can increase the incidence of disease. It expects more attention to be focused on this subject in future.
Finally, I will ask the Minister a question on the subject of external cladding. We read recently that another government Minister had declared that he wished to promote this form of energy efficiency. Will my noble friend give an assurance that this will not be done to listed buildings? We do not want beautiful buildings and streets being vandalised into eyesores in the name of energy efficiency. Enough damage is already being done to the countryside by wind turbines, as the Minister well knows.
Lord Whitty: My Lords, I have a number of points; I will try to restrict them to five. The first two follow up on what my noble friend Lady Worthington referred to as “joining up the dots”. The first is very straightforward and relates to the previous item. I do not understand, even at this late stage, why the Government’s programmes for smart meters and the Green Deal are not allied at least in their means of delivery and timing. Householders will be faced with two different initiatives, one compulsory and one voluntary, at the same time. They could easily be combined. I will leave it at that.
My second and most important point concerns how the ECO mechanism and the Green Deal mechanism join up, in particular in relation to tackling fuel poverty. I think that the Minister was being a little economic with the truth earlier when he claimed that this represented an increase in the number of the fuel poor who would benefit from government policy. Figures produced by my former organisation, Consumer Focus, indicate that the total spend on fuel poverty will fall from £1.1 billion to £540 million in 2013. The latter amount will be accounted for largely by the proportion of the ECO that will be geared to addressing fuel poverty.
As the noble Lord, Lord Reay, said, all consumers will pay for the ECO. It is more or less a poll tax and therefore regressive on those who cannot afford to pay. The offset will be geared through measures such as the warm homes discount, and will include the gearing of some aspects of the Green Deal to the fuel poor. It is not clear that the fuel poor will benefit, in particular those who are tenants either of private or social landlords. Because of turnover and the nature of the tenants, it is unlikely that many will sign up to the Green Deal. Therefore, it would be much more efficient to deliver it via the landlord. Questions of inherited obligations would begin to disappear, and so forth.
It is not clear that in net terms the Green Deal can be delivered easily to individual households in tenanted property. It is not clear how obligations such as the forward payment could be delivered, and it is not clear how the relationship between the landlord and tenant could facilitate the take-up of the Green Deal—the payback from which will take a number of years. My central problem is that a significant element of those who are in fuel poverty will be unconvinced, if they are in their own property, of the need to take up the Green Deal. If they are in tenanted property, they will be unable on an individual basis to take up the most cost-effective ways of achieving Green Deal benefits.
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The reality must be that we need a new approach to fuel poverty. It may be that the Minister wants a grander occasion on which to announce how the Government are taking up John Hills’s report, which makes a number of useful suggestions. The most important strategic one of those is that you need to treat as a matter of priority the least energy-efficient homes within which the fuel poor live. That does not seem to be easily deliverable through mechanisms such as the Green Deal.
There could be different sorts of connective mechanisms and I will now move to my third point, which will be shorter. The development of decentralised heating appears to be a ministerial commitment that DECC is, I hope, pursuing. It can have a significant effect on the demand on the system and therefore improve energy efficiency, but district heating does not appear as a specified energy efficiency improvement, or in the qualifying energy improvements in the two measures. That means that if a private or social estate could have its energy efficiency significantly improved by the installation or upgrading of a district heating system it has no benefit under either list. I used the term lacuna earlier, and this is another lacuna in the range of measures that the Government are bringing in.
There is a further point on district heating about which I have written to the Minister. This relates to the ECO legislation rather than to the two specified measures. Would those who operate district heating systems qualify for assistance under the ECO measure if they were upgrading a system rather than if it was new? The wording under the section that deals with community benefits and advantage suggests that this would happen only if it was a new connection to the grid for the district heating system, whereas significant improvements could be made by upgrading existing systems. The Minister’s answer to my last but one point may therefore be quite complicated.
I return to the list of qualifying energy improvements. One improvement regarding oil-fired condensing burners jumped out at me from the page. It raised a general point. In the areas that are not connected to the gas network, involving a lot of hard-to-heat houses in rural areas, it will be an improvement to put in a new high-efficiency oil-burning condensing boiler. In other circumstances that would be the wrong solution. The right one would be to switch from oil to gas. That probably applies to a number of these other measures where they are sub-optimal. Adopting one technology may bring some improvement to energy efficiency, but
not the optimum improvement. In the application of these improvements is there an assessment as to whether it is the best, or near the best measure for that particular house and that particular building and household, as distinct from whether it can achieve and even meet the golden rule under the Green Deal terms? The Minister may wish to write to me about that as well, but it would be useful before we went much further if we could have some answers to these questions.
Lord Teverson: My Lords, this is the first document that we have debated in the House that refers to the carbon-saving communities obligation. I want to welcome that because it plugs a hole. The Government have listened and put that in. It is important that that has happened.
I do not want to take over the Minister’s task, but I say to the noble Lord, Lord Reay, that energy efficiency is costly now, but we are paying the cost of the lousy house constructions of the 1950s, 1960s and 1970s. Someone has to pay for that, and unfortunately it has come to us, our generation, to do it. Is that the right thing to do? Absolutely everything that I have ever read, seen or had numbers on has said that energy efficiency is a far more cost-effective way of reducing energy demand or decarbonising than all the other technologies that we tend to talk about. It is completely obvious that it is better to save than to spend to save later. That is why the Green Deal and this area of the ECO are important.
The noble Lord, Lord Whitty, made a number of points on which I agree, and there are a lot of question marks about how things will roll out, but I get the impression from the Government’s mood changes, which are welcome, that the Green Deal is such a large, important, new and innovative programme that it is impossible to nail down all the details right away. We are going to have to go through a learning curve as we implement it. We obviously have to get a number of bits of it tied down, but I am sure that over the first one, two or three years, the programme will change in detail because some of it will not work and some of it will. That is why I welcome the fact that there is not a big-bang launch of the Green Deal but an introduction that tries to learn from the initial experience of rolling it out.
I know that this is a DCLG issue, but I should be interested if the Minister can tell us how the 2016 deadline on, effectively, zero-carbon houses is going. I know there are a number of challenges around achieving that, but I would dearly love to understand whether we are now approaching that optimistically so that in future we do not have the problem that we inherited from those post-war decades of bad house construction.
My list of specific questions for the Minister is even shorter than the list of the noble Lord, Lord Whitty. We want to get a lot of people out there to take advantage of the affordable warmth part of the energy company obligation. What plans do we have to make sure that those people are aware of this scheme and get it to work if they are not approached by their energy supplier? That is always a problem with these issues.
The noble Lord, Lord Whitty, made a point on the rented sector. I am not as pessimistic about the rented sector because the scheme is written with the debt applying to the meter, so there is every incentive for even a short-term tenant to get the Green Deal if they want because they do not have to pay it back later on if they move on in a few months’ time. It still requires them to be motivated to do it, to be told that they can and to be able to understand that. I would be interested to understand the Government’s point on that at the minute. This will require working with local authorities to roll this out street by street, neighbourhood by neighbourhood, and village by village.
Lastly, there is a small issue around warranties. The warranty conditions under the Green Deal are pretty good now. I would like to understand from the Minister whether we are going to have an equivalent warranty position on the affordable warmth programme.
Lord Grantchester: I thank the Minister for his explanation of the orders. From our side, we are pleased to continue our support for the Green Deal. Any demand-reduction and energy-efficiency improvements are vital for meeting greenhouse gas emissions targets, energy security and climate change mitigation. It has been reassuring that the coalition Government have continued along the pathway set by our previous Labour Administration, but it has been frustrating that progress has been slow at times. While recognising the imperative that measures must be fully budgeted, it has been frustrating that schemes have oscillated wildly, as happened with the feed-in tariffs fiasco, undermining confidence and jeopardising investment.
When readjusting payments in the future, it cannot be stressed enough that adjustments must be smooth and based on accurate and meaningful calculations. I begin with the energy company obligations—ECO. Since the passing of the Energy Act last year, it is recognised that there will necessarily be a period of consultation and drafting. It is recognised that the Government have responded positively, and the noble Lord, Lord Teverson, was correct to draw attention to this in his remarks.
The proposals strengthen key areas such as consumer protection, strengthen protections for lower-than-average energy users and those in rural areas, and adopt Labour’s proposals to include hard-to-treat cavity wall insulation. However, there is concern that following the Minister’s department’s downgrades the schemes will not achieve the targets necessary. The Government have been high on hyperbole and claims, to quote the Minister in the other place,
“to improve 14 million homes by 2020 and a further 12 million by 2030”.
Now that we have the final impact assessment, these claims can be assessed in detail. The actual figures are much less stunning.
The department’s figures for loft insulations suggest that they will fall from about 900,000 this year to just 150,000 next year, a decrease of some 80%. Cavity wall insulations will drop from 700,000 to 400,000 in 2013. Solid-wall insulations will remain the same as this year. These downgrades will have significant consequences for the industry, for the country’s ability to meet
climate-change targets and, most importantly, for the many hard-pressed households struggling with everyday energy bills.
As to the Government’s consultations and dialogue with industry, there are several detailed points on which I will press the Minister. The industry has signalled that it is keen to work with government, and has made significant progress. My noble friend Lord Whitty has already spoken to points raised by the Combined Heat and Power Association on district heating. The ECO is intended to work in tandem with the Green Deal policy to enhance further the installation of cost-effective energy efficiency improvement measures, especially measures not fully financeable through the Green Deal alone—for example, through solid-wall insulations. A supplier may support a measure under the ECO. However, it is not clear what is the process under which the ECO may be triggered and join up with the Green Deal, and how the hierarchy of providers, assessors and the bill payers will have clarity of responsibility. Once again, my noble friend Lord Whitty has highlighted this issue, especially the difficulties of fuel poverty.
We are keen to see the Green Deal be a success. However, there are continual concerns raised as each proposal is announced. It is not only Labour that is raising concerns. A coalition of 16 organisations, including Consumer Focus, SSE and the WWF, recently issued a paper, which stated:
“The Green Deal and ECO, as they currently stand, are nowhere near sufficient to meet the challenge of eliminating fuel poverty and ensuring affordability for all”.
Low take-up will seriously impact the British installation industry. It has been claimed that the Green Deal will create 250,000 jobs. Now, in the impact assessment, the department has downgraded its estimates again. The Minister in the other place has put the figure at a mere 34,000 jobs created by 2050. Under the department’s worst-case scenario, only 12,000 jobs may be created by then. Every new job is to be celebrated at a time when the Government’s economic policies are making many people redundant or out of work. Does the Minister have an update today on how many jobs will be created by the Green Deal next year and up to 2015?
6.15 pm
The Minister will remember the debates during the passage of the Energy Bill on the importance of the rented property sector and the amendments around bringing rental properties up to at least category E on the energy performance certificate. From 2018, properties not up to category E cannot be let. From 2016, tenants will be legally allowed to demand energy efficiency improvements to their homes. The private rented sector is hard to engage with and the cost of improving these properties is likely to be greater than anticipated. Improvement works may be more problematic with 40% of housing having been built pre-1920, and 20% of tenants being assessed as living in fuel poverty. The whole edifice of the Green Deal looks precarious around these difficulties.
There are many unanswered questions in the briefings that I have received, some of which I will pose to the Minister. On finance and incentives, part of the reason why the take-up may be low is that the public do not believe the Green Deal to be a good deal. We still do not know what the typical rate of interest may be. From research undertaken by the Energy Saving Trust, the public seem reluctant to countenance rates of interest above 5%. Recent disclosures suggest a likely rate of 7.5%. Does the Minister think that such a rate would represent a good deal?
What discussions have taken place between the Government, be that the department or the Treasury, and the Green Deal Finance Company, which appears to be the only organisation proposing finance for the Green Deal? The company seems to have halted activity because of a lack of government support. Have the Government, through their shareholding in the banking industry, expressed a view concerning finance costs that should be borne by the bill payer? Have they discussed sponsorship? The objectives of the Green Deal should not be clouded by financiers putting profit before services.
The rate of 7.5% means that a £10,000 Green Deal plan would cost £22,000 to the bill payer over 25 years. That is the equivalent of around £900 a year, just under three-quarters of the average home’s £1,300 annual energy bill, making it likely that a Green Deal will breach the golden rule. Even allowing for the backsliding that Ministers and the Government seem to be allowing, not all households are likely to be able to see savings on their bills to pay back the cost of improvements.
A number of queries arise out of that. First, will the golden rule still include finance charges? Secondly, could the charges lead to a two-tier market whereby some homes became more to difficult sell or rent if the attached Green Deal plan looked unacceptable, either to the present occupier who may wish to leave or to a future occupier? Private landlords are concerned that they would be left with the bill and no tenant. I ask the Government to allow landlords the choice to pay the Green Deal charges directly to avoid tenant resistance and to allow them to see real changes on their energy bills.
Thirdly, are the Government looking again at the penalty charges for early repayment? Does the Minister think it appropriate and fair that a new tenant who may wish to clear the debt undertaken by a previous tenant should pay a penalty charge? Fourthly, if the objective is to make energy efficiency improvements, will the Government give tax incentives and allowances for improvements to go ahead outside the Green Deal? Under Regulation 27, the estimate of savings essential to the golden rule must be made on the assumption that all the improvements are installed at the same time. Will the Minister clarify the position if improvements happen in instalments over a few years? For repayment periods under Regulations 28 and 30, where a number of improvements occur over time, are repayment schedules to be flexible to allow adjustment on a clear basis to each bill payer? Under Regulation 35, in conjunction with Schedule 3, there does not appear to be any provision for consequential loss following works that
may be required if a property is damaged during a Green Deal improvement. Will the Minister clarify this position?
It has been said correctly by other noble Lords that a huge challenge is being undertaken. I am sure the Minister will agree that it will be a constant process of improvement and refinement to bring the Green Deal to success. I do not wish to downplay the challenges. We wish the Green Deal to be a success. We are happy to help the Minister along his learning curve.
Lord Marland: My Lords, I am extremely grateful for the contributions. It is worth saying that we have taken the Green Deal through this House. It has been rigorously stress-tested. A number of changes that we have made are entirely due to contributions from Ministers.
Lord Marland: Not Ministers yet, but they could be in time. Actually, I am thinking of the noble Lord, Lord Teverson, who is so good at replying to the questions that I am asked, I might ask him to sign up. I meant to say that the changes were due to the contributions of noble Lords. What we have set before the Committee is merely a tightening of the belt and a response. Let us be fair; noble Lords all know that they are just going through the motions and asking questions that will continue to tighten up and improve an extremely well put together Bill, because they helped to put it together.
I shall deal with specifics and ignore some of the political air traffic because it is not a political issue. My noble friend Lord Dixon-Smith made a very good point on behalf of the double-glazing industry. Her ladyship is obviously very concerned. The noble Lord declared his interest that he is, to date, not double-glazed, and he has probably been put up to it by her ladyship rather than the industry. We are pretty clear that double glazing qualifies under these provisions and we have to differentiate between home improvements and energy-saving issues. People who qualify should have better standards that are the minimum standards in the building regulations. I hope that that satisfies my noble friend’s questions. Perhaps he will be kind enough to let me take up his offer to allow me to write to him on his technical questions about grade C because the issue is technical and I am known for, and have admitted to, my lack of detailed knowledge of these band areas. It would be better to have it in black and white from experts.
The noble Lord, Lord Reay, who is not known as a great fan of the Green Deal, happily repeated that he is not a great fan and quite reasonably asked for an explanation of the figures that we have come up with. The answer is as follows: the £1.3 billion is the total expected cost of all three elements of the ECO, and the £540 million is the expected cost of the elements that are expressly reserved for supporting low-income and vulnerable households. I hope that that clarifies matters. As someone who is passionate about our architecture and our countryside, I quite reasonably expected the noble Lord to ask about external cladding,
and I am very happy indeed to confirm that there will be no change in the planning conditions as they stand in relation to any external changes to a house.
I move on to the noble Lord, Lord Whitty. I must say that I mopped my furrowed brow when he said in his letter, “I may not be in London in time for the Moses Room discussions”. What a relief it is that he is with us because his incisive questions are, as always, very difficult for a simple soul like me to deal with. His letter arrived this very morn and is full of a lot of the detail that he has mentioned. I shall be delighted to respond to him in writing, although I shall deal with some of his questions now, just to keep the conversation going.
The noble Lord, Lord Grantchester, amplified the point about joined-up thinking between smart meters and the Green Deal. In an ideal world, we would push everything out together and do it all at the same time but, as we all know, the world is not ideal. There is a defining difference between smart meters, which are an obligation, and the Green Deal, which is a market-led opportunity. We cannot always have opportunities as obligations or vice versa. I am sure that the noble Lord will understand that.
He touched on the very important subject of fuel poverty, which is at the heart of most people’s concerns. Professor Hills has come up with an excellent report. We published his interim report, which found favour with your Lordships. The report looks at the definition of fuel poverty because—making a small political point—it went up exponentially under the previous Government, despite everything that they did. I compliment the previous Government on everything that they did to try to stop fuel poverty but it went up exponentially because, as we all realise, the definition was not the right one. We must get to grips with the definition because in doing so we get to grips with the problem. We will watch this space very carefully as the Green Deal unwinds, Professor Hills’s final report is put in place and we bring everything together.
On the private rented sector, the noble Lord, Lord Teverson, amplified and supported the point made by the noble Lord, Lord Whitty. A great effort was made by your Lordships; in this House, we put in a review for 2016. I do not think any of us wants to waver from that date. We persuaded the other place that it was the right thing to do and we will wait for it.
The noble Lord rightly raised the district heating system, as he did in his letter. Indeed, it was through consultation and the great work of noble Lords here in pointing it out as we took the Bill through the House that we agreed to embrace the district heating system within the current regulations and take it on. As I say, there is a lot of detail in this letter, as you would expect from the noble Lord, given his expertise. I will reply to his letter in full and put that reply in the Library so that everyone can see it.
I say only that I am not known for being economical with the truth. I do not think that the noble Lord meant it in that way; I think he was just arguing over the semantics of the figures. Fuel poverty and the number of people who could be employed vary and are often a matter of estimation and guesswork, albeit based on statistical evidence and forecasting.
The noble Lord, Lord Teverson, to whom I am always grateful, mentioned carbon savings being at the centre of everything that we are trying to do. He is absolutely right: we have inherited a legacy of poor home construction, which is not exclusive to certain areas. This is part of what the Government are about. Trying to reduce demand is absolutely fundamental, as we have discussed. As for getting to zero carbon by 2016, fingers, toes and other parts of the body are crossed. It is a very challenging task and we are committing to it.
The noble Lord mentioned the “affordable warmth” sign, the affordable warmth system and the warranty system. Ofgem is coming up with a load of rules and regulations for the warranties, which will be supplied later. To ensure that those who are entitled to it get it, there will be a referral service. We are setting that up now. People can refer to it, and it will be monitored by our department.
6.30 pm
I am largely grateful for the continued support of the noble Lord, Lord Grantchester—despite the little disguise he tried to employ of a few political things, but we will ignore that—about rates of interest. They are fundamental, but we have to understand that this money is being lent unsecured. There is a difference between the rate you would get for a mortgage and the rate you would get for an unsecured loan. We do not believe that our guesstimate of between 5% and 8% is an unreasonable figure. I am very happy to commit our expectation of the ultimate cost, which differs from his. I shall not go into the detailed figures now, but will commit to him in a letter and put it on record.
As the Green Deal is a private sector-led scheme in its entirety, it is sensible that the Green Deal finance company is privately commercially operated. It is being led by PwC. It has submitted its business plan. It is on target for what we are trying to achieve, and one cannot ask more than that. It is not for government to interfere, other than to ensure that it happens and to approve the business plan. The noble Lord talked about penalty charges and tax incentives. Obviously, there will be penalty charges, but I do not see at this point the need for tax incentives until we see how the scheme goes. Part of our review in 2016 will be monitoring how the scheme goes and how the private rented sector is going.
The one I am totally stumped on—
Lord Grantchester: While the Minister reflects on another point, we are trying to get uptake by consumers. I wonder whether he has researched the situation as far as consumers are concerned. I am sure the Government could take steps to make sure that penalty charges are not a feature of the Green Deal plan.
Lord Marland: We want at all costs to avoid penalty charges for a private scheme. It is therefore not really for the Government to indulge in imposing penalties. We are monitoring it, as noble Lords have insisted, and I completely agree. We are going to review the whole thing regularly but, in particular, in 2016. If, for
example, in the private rented sector, things are not going as we hoped, we must, where possible, enact to impose penalties.
The thing I am completely stumped on is consequential loss. It needs greater amplification for me to understand the issue, so with the indulgence of noble Lords, perhaps we can do it at a separate time. I hope noble Lords will forgive me because I need to understand the question in more detail in order to give a satisfactory reply.
Green Deal (Qualifying Energy Improvements) Order 2012
Copy of the SICopy of the ReportCopy of the Report
Considered in Grand Committee
6.33 pm
That the Grand Committee do report to the House that is has considered the Green Deal (Qualifying Energy Improvements) Order 2012.
Relevant document: 3rd Report from the Joint Committee on Statutory Instruments, 5th Report from the Secondary Legislation Scrutiny Committee.
Green Deal Framework (Disclosure, Acknowledgment, Redress etc.) Regulations 2012
Copy of the SICopy of the ReportCopy of the Report
Considered in Grand Committee
6.33 pm
That the Grand Committee do report to the House that is has considered the Green Deal Framework (Disclosure, Acknowledgment, Redress etc.) Regulations 2012.
Relevant document: 3rd Report from the Joint Committee on Statutory Instruments, 5th Report from the Secondary Legislation Scrutiny Committee.
Green Deal (Energy Efficiency Improvements) Order 2012
Copy of the SICopy of the ReportCopy of the Report
Considered in Grand Committee
6.34 pm
That the Grand Committee do report to the House that is has considered the Green Deal (Energy Efficiency Improvements) Order 2012.
Relevant document: 3rd Report from the Joint Committee on Statutory Instruments, 5th Report from the Secondary Legislation Scrutiny Committee.
Public Bodies (Abolition of the Commission for Rural Communities) Order 2012
Copy of the SICopy of the ReportCopy of the Report
Considered in Grand Committee
6.35 pm
Moved By Lord Taylor of Holbeach
That the Grand Committee do report to the House that is has considered the Public Bodies (Abolition of the Commission for Rural Communities) Order 2012.
Relevant document: 3rd Report from the Joint Committee on Statutory Instruments, 3rd Report from the Secondary Legislation Scrutiny Committee.
The Parliamentary Under-Secretary of State, Department for Environment, Food and Rural Affairs (Lord Taylor of Holbeach): My Lords, I welcome this opportunity to debate the draft order, which is made under the Public Bodies Act 2011. It reflects oneof the outcomes of the Government’s programme of reform for public bodies. The order will abolish the Commission for Rural Communities—the CRC—and finalise the consolidation of rural policy functions within Defra.
I take this opportunity to thank the commission, Dr Stuart Burgess and his team of commissioners for their commitment to the well-being of rural communities. I also thank them for the constructive way in which they have continued to work in liaison with Defra’s rural communities policy unit. I would expect no less of Dr Burgess, who I know, and for whom I have the highest regard.
The rationale for this reform was articulated during the passage of the Public Bodies Act, in which we sought powers to abolish the CRC. We consulted widely, as required by the Act, on both the new rural policy functions within Defra and the abolition of the CRC. Of the 41 responses received, 12 individuals and organisations supported abolition, 12 respondents were opposed and 17 did not expressly support or oppose abolition.
We firmly believe this reform to be necessary. Placing rural interests at the heart of government, led and championed by Defra Ministers, will allow us to shape and influence policy across Whitehall at an early stage. The abolition of the CRC is not a decision that the Government have taken simply to reduce costs or to reduce attention to rural issues. It is a decision that will remove duplication, improve effectiveness and enable resources to be more effectively deployed.
Although not the primary driver, there will, of course, be financial savings to be made as a result of this reform. These are considerable: net savings of £17 million over the period of this CSR. This is a Government, from the Prime Minister down, with strong rural credentials. We have clear and bold ambitions for our rural areas. The abolition of the CRC paves the way for Defra’s Ministers to bring forward new, more effective, approaches to ensuring rural needs and opportunities are properly understood before decisions are made.
On 1 April 2011, the rural communities policy unit—the RCPU—a centre of rural expertise, was created in Defra. The RCPU is designed to engage more effectively, and at an earlier stage, in the development of policy across government. For example, it is brigaded alongside the team working on and delivering the RDPE, which is Defra’s key funding stream for the rural economy.
Noble Lords will be aware that in consideration of the order, the Secondary Legislation Scrutiny Committee recommended that the rural statement should set out not only government-wide policy intentions but robust structures for incorporating stakeholder input into policy development and implementation. We agree with and support this recommendation fully. The rural statement will underline our commitment to rural England. It reflects our vision for successful rural businesses and thriving rural communities, and is based around three key priorities. The first is economic growth: we want rural businesses to make a sustainable contribution to national growth. The second is rural engagement: we want to engage directly with rural communities so that they can see that the Government are on their side. The last is quality of life: we want rural people to have fair access to public services and to be actively engaged in shaping the places in which they live.
We accept and recognise that a two-way communication with rural stakeholders and communities is crucial to developing better policies and delivering more effective outcomes. As our Explanatory Memorandum highlighted, we want to continue to engage proactively and positively with partners, including local government networks, civil society organisations and business groups. Defra Ministers, for example, established the new rural and farming networks as a conduit to give key rural representatives and stakeholders a voice in Whitehall on behalf of their localities. Similarly, the RCPU has regular engagement with the Rural Coalition. This engagement has ensured that advice from experienced practitioners has fed in to changes in the planning system, housing and the economy. Through this regular engagement, Defra Ministers and policy officials across government are able to have present-time dialogue with those who represent the concerns and interests of rural communities. We encourage this dialogue to be as open and as frank as possible, as we see it as a mechanism for delivering good policy.
The Secondary Legislation Scrutiny Committee also recommended that the rural statement should provide specific details of the steps that the Government intend to take to deliver independent scrutiny of rural-proofing. Again, we agree with the broad thrust of this recommendation. Defra supports rural-proofing by providing advice, guidance and support to policy officials across government. Alongside this commitment, we will publish new rural-proofing guidance materials in September. The rural statement will outline our commitment to commissioning an external review of the impact of the new rural-proofing package, to be undertaken in summer 2013.
Importantly, Defra Ministers will also be accountable to Parliament for the way that they fulfil their role as Rural Champions. Noble Lords will be aware that the EFRA Select Committee is currently undertaking its
inquiry into rural communities. It is focusing on the role of the RCPU, rural grants and funding and rural-proofing—all part of government policy. My ministerial colleagues and I welcome the attention that this is placing on both the role of the RCPU and our efforts to ensure that all government departments are giving adequate attention to rural-proofing their policy and decision-making. This is an important opportunity to demonstrate both our commitment and our actions toward supporting the interests of those living and working in rural areas.
This is a good reform heralding a new and exciting era for our rural communities. I firmly believe that this is the right way forward, and that this order, and the new arrangements we have put in place with the RCPU, will deliver the right outcomes for rural communities. To this end, I commend the draft order to the Grand Committee.
6.45 pm
Lord Knight of Weymouth: My Lords, this afternoon we are discussing another public bodies order from Defra. To date these discussions have been friendly affairs, much in keeping with the amicable way in which the Minister dealt with the dodgy primary legislation as it went through your Lordships’ House. I fear that our deliberations today might be slightly less consensual. As we heard, the Commission for Rural Communities was established by the Natural Environment and Rural Communities Act 2006, following the review led by the noble Lord, Lord Haskins. I was the Bill Minister for the NERC Act and therefore would describe myself as something of a midwife for the CRC.
That does not mean that I oppose the order outright, but it does mean that there are important questions for the Minister to answer. They happen to be the same questions that I asked when the Public Bodies Bill was going through the parliamentary process. As ever, I am grateful to the Secondary Legislation Scrutiny Committee, on this occasion for its third report of this Session. Its conclusion is the one that I came to last year and that I know is shared by many in the House. The committee correctly applied the three tests of effectiveness, economy and efficiency, and accountability. As is the way with these orders, it is right that I should do the same.
The Government argue that it is more effective to bring officials in-house, rather than have them at arm’s length, so they will have earlier and greater involvement in the development of policies and programmes across Whitehall. I am afraid that in my experience Defra is not central to the Government’s thinking until there is a crisis, and that rural policy in turn is on the margins of Defra’s thinking. The clue is in the name. It thinks about the environment, then food and farming, and finally rural affairs. There is no sign that this has changed. We witnessed the inability of the department to secure a legislative slot in this Session for the much-needed water Bill. That is the reality of the marginalisation of Defra. To argue otherwise is naive in the extreme.
As the Minister said, the Government are looking to save £17 million over the CSR period by this change to their rural policy function. That is the real reason
for this change: economy. I do not argue that savings are there to be made, although it is worth noting that the CRC cost around £600,000 in the past financial year. It is worth diverting some of the remaining cost of the rural policy function to support the continuation of a rural policy adviser who is independent of government.
My main objection to the move is on the ground of accountability. The Government argue that these changes will enable Defra’s Ministers to be held accountable by Parliament for the exercise of rural policy functions. However, we should look at how Parliament is currently being treated. Over the weekend, dairy farmers blockaded milk processing plants to draw attention to the exploitative pricing that is making milk production uneconomic. Two supermarkets have already responded by raising the prices they pay to farmers. The farmers clearly believed that parliamentary methods were not being listened to—and was it any wonder?
Today it was reported that Jim Paice, the Agriculture Minister who does not know the price of milk, had raised the possibility that an adjudicator would be created to oversee a voluntary code for the dairy supply chain. This is exactly what my noble friend Lord Grantchester suggested last week when he moved an amendment to the Groceries Code Adjudicator Bill. Coalition Peers were whipped to oppose it—and duly defeated the very proposal that is now coming from the Agriculture Minister. Just one week later, threatened by angry farmers, Defra’s policy is churning, thanks to direct action rather than parliamentary pressure.
This follows a succession of protests that bounced Defra. Its proposals to sell off the nation’s forests were met with huge protests and it backed down. The same happened with national nature reserves and changes to reduce environmental protection in planning law. There was the case of wild animals in circuses. Over Easter Defra suggested allowing the shooting of buzzards—a native species—to protect pheasants, which are a non-native species bred to be shot. Unsurprisingly, that was laughed out of the court of public opinion within days. In these cases, we made what noise we could in your Lordships’ House or in the other place, but it was clear that Ministers were more accountable to 38 Degrees, the National Trust and Farmers for Action than to this Parliament—so much for accountability.
The lack of long-term strategic thinking that bedevils Defra is at the heart of the issue. At the same time, rural England feels the effects of policies and cuts from other government departments. For example, it emerged this month that the rate of young people not in education, employment or training is rising faster in rural areas than in urban ones—and that rural councils, which tend to have older and less deprived populations, receive lower grant allocations, spend less on social care, charge more for home care and allocate lower personal budgets than local authorities serving younger, more urban and more deprived populations. New research finds that social tenants in rural areas will be more likely than those in urban areas to have to move house as a consequence of reductions in housing benefit, yet there are fewer smaller dwellings for them to move into. I know these things thanks to the July
newsletter from the Commission for Rural Communities. Its reports often make uncomfortable reading across Whitehall. The independence from government of these reports increases accountability. That is why a letter to today’s
Daily Telegraph
is signed by the right reverend Prelates the Bishops of Wakefield, Norwich and Exeter, the Duchess of Rutland, the High Sheriff of Cornwall, me and other parliamentarians, including my noble friend Lord Grantchester.
As the letter says, there has been an independent voice to government since 1909. It goes on:
“In the current economic circumstances it is more important than ever that the voices of rural communities are not lost and that an independent adviser—distinct from the range of rural pressure groups—exists to speak up for rural interests”.
That is all we ask—not for the expensive retention of the CRC, but for the retention of what has served us well for more than a century, an independent rural champion. What do the Government propose instead? The independent voice will be provided by Defra’s very own Rural Affairs Minister, Richard Benyon, he of the buzzards U-turn. Rural England’s new champion will be inside the tent but, unusually, on this occasion pointing inwards.
The lack of commitment is demonstrated by the facts that Mr Benyon has not delivered the new rural-proofing guidance promised even today on the Defra website for this spring, and that he has failed to deliver a rural statement, referred to by the Minister, by spring 2012, which was also promised today on the Defra website. That is serious for this Committee. Can the Minister tell us in his wind-up what happened to it? Are we going to get it in September, along with rural-proofing toolkit, six months late?
As he says, the Secondary Legislation Scrutiny Committee specifically recommends that the rural statement sets out robust structures for incorporating stakeholder input into policy development and implementation. The Minister responded to that by referring to the explanatory document which has already been scrutinised by the Secondary Legislation Scrutiny Committee. It then wanted more information, which we do not have, to scrutinise this order.
I ask again what I asked the noble Lord, Lord Henley, in column 765 in March last year. Why not give us an independent rural voice that tells us by appointment, with the authority of the Prime Minister, what is really happening and tells us the truth regardless of fear of or favour from the Government? It worked for Lloyd George, for Churchill and for Thatcher. Is it really too much to ask?
Lord Cameron of Dillington: My Lords, I thank the Minister for his introduction to this, and his team for providing the explanatory document about the different ways in which consultation will take place with rural groups such as the Rural and Farming Network, ECO and its sub-groups, the Rural Coalition, local economic partnerships, the Rural Service Network and the LEADER exchange group. I know that LEADER is an initiative to do with the delivery of the Rural Development Programme for England, but the word made me think. These groups, or leaders of groups, such as farmers, businessmen and local councils, are all stakeholders—to use the Minister’s word—in the countryside.
Who is going to represent the deprived of rural England—those who sometimes go with only one meal a day because they know that they have to spend their money on a car to get to their valuable work, or to have any of form of life there? Who is going to speak up for the countryside’s young, who cannot get a job because they have not got the transport to get to one and cannot get the transport to get to a job because they have not got a job to pay for the transport? Who is going to speak up for the unemployed, the unhoused and others?
The Minister will know that I am in a slightly difficult position. I have been asked by Richard Benyon, the Defra Minister in the Commons, to pool together a group of Peers to help rural-proof the government department’s policies in each individual case, but I still have not quite grasped who is going to do or commission the critical and independent research that will penetrate the normal attitude of most departments to the countryside, which is ambivalent at best. Actually, their attitude ranges from ambivalence to total ignorance and they need spurring on.
Most of us in this Room have argued our best on several occasions for some representation at arm’s length from Government, as stated by the noble Lord, Lord Knight, of those rural voices that are not normally heard. I hope that the Minister can reassure me on the question of the independent, fearless research that is often critical of the Government, and which departments are, frankly, unable, to carry out. I hope that he can also reassure me on my point about who will represent the voice of the rural deprived.
Lord Curry of Kirkharle: My Lords, I thank the Minister for his statement and his desire to ensure that the commission’s functions are properly fulfilled within Defra. I say from the outset that I am not opposing the decision to abolish the CRC. However, it is now clear—indeed, it was clear to many of us at the time—that in the desire to have a large bonfire of the quangos, decisions were taken without a clear plan for properly addressing the consequences. I am pleased that Defra has a plan, but I would like to be reassured that the functions of the CRC will be properly resourced and carried out by Defra. As the noble Lord, Lord Cameron, said, the CRC did some very helpful and useful research into issues like rural poverty and changes in demographics in the countryside that will be essential in helping design policies that impact on the countryside.
It is essential, as has been said, that government policies have a degree of rural-proofing. Without an independent commission, I suggest that it will be difficult for the department to fulfil this function without trying in the process to defend government policies in doing so. It is difficult for a department to be, if I might use the phrase, both gamekeeper and poacher. The role of the rural advocate, as the noble Lords, Lord Knight and Lord Cameron, said, has been extremely useful in highlighting many vital rural issues. Dr Burgess has been a very effective and active advocate, as was his predecessor, the noble Lord, Lord Cameron, before him. It has already been stressed that the element of independence that has been so valuable is being lost. The role of the rural advocate should be reconsidered.